Rs 9,000 crore wiped out in a day: Why Swiggy investors are losing patience with Instamart

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Swiggy shares plunged on Friday, wiping out around ₹9,000 crore in market value. 

The selloff followed a series of brokerage downgrades and target price cuts after Swiggy’s Q2 results exposed the cost of pursuing growth in quick commerce. JM Financial maintained its “REDUCE” rating and cut its price target to ₹200 from ₹255, while Nuvama reduced its target to ₹200 from ₹255. Nomura retained a Buy rating but lowered its target to ₹300 from ₹435. Emkay Global cut its target to ₹310 from ₹350.

The common concern was Instamart’s deteriorating profitability.

Instamart’s net order value grew 13.4% sequentially in the second quarter, but its contribution margin worsened to negative 1.4% from negative 0.3% in the previous quarter. Adjusted EBITDA losses widened to ₹895 crore from ₹778 crore.

The growth came at a price as Swiggy added 69 dark stores during the quarter, taking its total network to 1,240 stores. Orders per dark store rose to 1,192 from 1,089, but analysts attributed the improvement to aggressive investments.

Also Read | Swiggy shares crash 14%, hit 52-week low after Q2 results. Here’s why Jefferies, Nomura, Bernstein cut target price

JM Financial described the result as “Instamart: Losses delivered instantly” and said it remained “unconvinced about any real path to profitability in the foreseeable future” given what it called continued poor execution.

Management has said that Instamart’s losses peaked in the quarter and that the business could break even at 2.3 times its current scale. That implies annualised NOV of about ₹6,000 crore, compared with roughly ₹2,600 crore currently. Management also estimates that breakeven would require a contribution of ₹30 per order.

For investors, however, the issue is not only the size of the losses but the visibility of the path to profitability. Emkay said sustained double-digit sequential NOV growth, better customer retention, improved monetisation and higher store utilisation would be necessary before assigning a higher valuation to the quick commerce business.

The pressure on Swiggy’s valuation is also coming from its experimental businesses. Losses in Platform Innovations, which houses Toing, widened to ₹162 crore from ₹131 crore in the previous quarter.

JM Financial said it saw “zero rationale” for treating Toing as a separate business because it uses the same restaurant and delivery partner networks as Swiggy’s core food delivery operation and has an overlapping customer base. It also flagged the risks of cannibalisation, rising cash burn and questionable incremental value creation.

The brokerage said Swiggy should discontinue Toing and redirect resources towards strengthening its core food delivery franchise.

Food delivery remains the company’s strongest asset. Food delivery GOV grew 17.7% year-on-year to ₹10,054 crore, while adjusted EBITDA rose 42% year-on-year to ₹341 crore. The adjusted EBITDA margin improved to 3.4% from 2.8% a year earlier.

Nomura said food delivery remained a “cash cow” and expected it to generate ₹1,300-1,900 crore of EBITDA in FY27 and FY28. It retained a Buy rating despite cutting its target to ₹300.

But Swiggy’s food delivery growth still lagged Eternal. Swiggy’s food delivery GOV grew 17.7% year-on-year, compared with Eternal’s 21.5% growth in NOV, while its quick commerce NOV rose 13.4% sequentially against 22.2% for Eternal.

That divergence has intensified investor concerns over whether Swiggy is losing ground in its core business while spending heavily to close the gap in quick commerce.

Emkay continues to view Swiggy as a strong food delivery franchise, with quick commerce offering optionality. But it said the company would need to demonstrate sustained growth and improving unit economics in Instamart before the market assigns greater value to the business.