Why Swiggy’s Toing is raising questions over food-delivery profitability

Swiggy Ltd’s affordable-meal app Toing has prompted questions from analysts about whether the food-delivery company can expand its customer base without diluting the profitability of its core business.

“Food delivery is a tricky business because competition is intense and customers are sensitive to pricing. The question for Swiggy is whether Toing can bring in incremental demand without putting further pressure on the economics of its core platform,” said Satish Meena, analyst at Datum Intelligence.

Launched to attract price-sensitive consumers, Toing gives the company another way to reach customers who may be unwilling to pay for meals through its main app. In its latest shareholder letter, it said the offering could help lift growth in its combined food-delivery marketplace to 25-30%, compared with its guidance of 18-20% for the core business, excluding Toing.

Analyst scrutiny

However, brokerages beg to differ. In a note dated 23 October, JM Financial said it saw “zero rationale” for operating Toing as a separate business, arguing that it uses the same restaurant and delivery-partner networks as Swiggy’s core platform and serves an overlapping customer base.

The brokerage also raised concerns about cannibalization, cash burn and the incremental value created by the offering. It recommended discontinuing Toing and redirecting resources towards the core food-delivery business.

Swiggy’s Platform Innovations segment, which includes experimental initiatives such as Toing, reported an adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) loss of ₹162 crore in the September quarter, up from ₹131 crore in the June quarter. The company does not disclose Toing’s standalone financials.

The company, meanwhile, has pointed to early signs that Toing is attracting new or returning users. Two out of every three Toing users were either first-time Swiggy users or customers who had been inactive for an extended period.

Customers ordering through both apps also had a combined order frequency about 25% higher than their individual order frequency on either platform, it said. These figures suggest Toing could help increase engagement, although they do not establish how much of the growth is incremental to the overall marketplace.

The company also acknowledged that demand had shifted between Toing and its main app in ways that were difficult to predict. “There was some interplay of demand levers on one platform versus the other, which was hard to predict as we built out both the offerings,” Swiggy said in its September quarter shareholder letter.

It said it was seeing “early green shoots of business-market fit”, with unit economics turning positive among repeat users in the cities where Toing was launched first. However, it said monetization and cost structures still needed to improve, with greater clarity on the model’s scalability expected over the next one to two quarters.

Rising competition

The questions around Toing come as Swiggy faces a broader execution challenge against Eternal Ltd, which operates Zomato, across food delivery and quick commerce. CLSA highlighted a gap between the two companies in growth and profitability in the second quarter of fiscal year 2026-27 (FY27), noting that sustained operational improvements would be needed to rebuild investor confidence.

Competition in food delivery is also intensifying, with new entrants such as Flipkart and Shiprocket increasing investments to acquire customers and encourage more frequent ordering.

Eternal chief financial officer Akshant Goyal said during the company’s Q2 earnings call that competitive intensity was higher in the September quarter than in the preceding few quarters, partly driven by Eternal’s own investments.

“We’ve been aggressively investing in growth,” Goyal said. Investments in acquiring new customers and increasing order frequency among existing users had risen over the past few quarters, he said, adding that the trend was likely to continue.

Eternal’s food-delivery business reported net order value (NOV) of ₹11,445 crore in the quarter, up 21.5% year-on-year. Adjusted Ebitda rose 25% to ₹627 crore, equivalent to 5.5% of NOV.

Swiggy, meanwhile, reported food-delivery gross order value (GOV) growth of 17.7% to ₹10,054 crore. Adjusted Ebitda rose to ₹341 crore from ₹240 crore a year ago. It said its core food-delivery business, excluding Toing, grew more than 20% on-year and reiterated its full-year growth guidance of 18-20%.

Toing’s longer-term prospects will depend on whether the app can attract customers and increase order frequency without simply shifting transactions away from its main platform, according to Datum Intelligence’s Meena.

”New initiatives in food and internet businesses can take time to find their footing, but companies must also be prepared to discontinue experiments that fail to demonstrate a viable business model,” he noted.

Despite the concerns around Toing, brokerage Nomura said food delivery remained a “cash cow” for Swiggy and expected the business to generate ₹1,300-1,900 crore in Ebitda in FY27 and FY28. It retained a buy rating on the stock while cutting its target price to ₹300. Swiggy’s shares were down 4.8% at ₹176.60 apiece on Friday at 3pm, even as the Sensex rose 0.49%.