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×Swiggy is transitioning to an India-owned structure to gain greater control over its Instamart operations and improve margins.
Swiggy expects a shift to an India-owned-and-controlled structure to give it greater ownership over its quick-commerce operations, with the move to inventory based ownsership potentially adding 80 basis points to its Instamart business' contribution margin, the company said as it announced quarterly results on Thursday.
Domestic ownership in the company which went public in 2024, has risen above 58% following a resolution which capped foreign ownership at 49.5%. The transition is scheduled to begin in the middle of third quarter of fiscal 2027, with completion eyed over the following two or three quarters.
Also Read: The Rs 200 meal is the new battleground for Swiggy, Zomato and other food delivery companies
The change comes as Swiggy is looking to improve economics at its Instamart business as it faces constant competition from Eternal-owned Blinkit, start-up Zepto and Amazon Now in the market. The company expects the investory-ownershup structure to provide it with more flexibity and control over pricing, availability among other things for day-to-day operations.
Swiggy is also looking to improve its working-capital cycle by eight to 10 days, which would thereby offset the additional investment required to hold inventory on its balance sheet.
The company reported consolidated adjusted EBITDA loss widening to Rs 760 crore in the September quarter from Rs 651 crore in the previous quarter. Its net loss increased to Rs 922 crore from Rs 791 crore.
Swiggy is aiming for around 100-basis-point quarter-on-quarter improvement in adjusted EBITDA margin as a percentage of gross order value in the third quarter. This is on the back of the company expecting to sustain growth while reversing some of the investments in pricing and bringing back users. Instamart's net order value jumped 13.4% to Rs 6,594 crore as compared to the previous quarter. Order volumes gained 13.8% quarter-on-quarter.
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Swiggy added 1.3 million monthly transacting users during the quarter, its highest addition in five. The company is expecting the next three months to see double-digit sequential net order value growth, while remaining cautious on intensifying competition which is not seen to be easing anytime soon.
About 67% of the required improvement is expected to come from higher revenue for every order through product mix, private brands and advertising. The remainder is expected from lower cost per order through de-intensifying network, automation and operating leverage.
The transition in inventory could help Swiggy improve its margins and operating control, but will not itself be enough to scale the business' profitability.
It maintained full-year guidance for food-delivery gross order value growth of 18% to 20%, excluding its new budget-meal offering, Toing. Swiggy added that growth in its core platform crossed 20% in September, with over 20 million transacting users.
The company further sees margins in its food delivery business to move towards its early mentioned adjusted EBITDA margin target of 5%. Monetisation led by advertisements, higher order density and shorter-distance deliveries have helped the company lift its bottom-line.
Toing could provide additional growth, with Swiggt mentioning the combined food-delivery marketplace could potentially grow 25% to 30% if the standalone budget-meal app grows. Swiggy, however, said it requires another one to two quarters to gain greater clarity on the model's effectiveness.
Domestic ownership in the company which went public in 2024, has risen above 58% following a resolution which capped foreign ownership at 49.5%. The transition is scheduled to begin in the middle of third quarter of fiscal 2027, with completion eyed over the following two or three quarters.
Also Read: The Rs 200 meal is the new battleground for Swiggy, Zomato and other food delivery companies
The change comes as Swiggy is looking to improve economics at its Instamart business as it faces constant competition from Eternal-owned Blinkit, start-up Zepto and Amazon Now in the market. The company expects the investory-ownershup structure to provide it with more flexibity and control over pricing, availability among other things for day-to-day operations.
Swiggy is also looking to improve its working-capital cycle by eight to 10 days, which would thereby offset the additional investment required to hold inventory on its balance sheet.
The company reported consolidated adjusted EBITDA loss widening to Rs 760 crore in the September quarter from Rs 651 crore in the previous quarter. Its net loss increased to Rs 922 crore from Rs 791 crore.
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Instamart losses seen peaking
The transition in ownership is among the various changes Swiggy is banking on to propel Instamart to profitability. The business' adjusted EBITDA loss widened by Rs 118 crore to Rs 895 crore in the September quarter, while contribution margin stood at -1% of gross order value. The company said it belives "the Adjusted EBITDA losses to have peaked out in Q2." It expects Instamart's contribution margin to remain between zero and minus 100 basis points of gross order value in the December quarter, with the figure improving sequentially thereafter.Swiggy is aiming for around 100-basis-point quarter-on-quarter improvement in adjusted EBITDA margin as a percentage of gross order value in the third quarter. This is on the back of the company expecting to sustain growth while reversing some of the investments in pricing and bringing back users. Instamart's net order value jumped 13.4% to Rs 6,594 crore as compared to the previous quarter. Order volumes gained 13.8% quarter-on-quarter.
Also Read: All-night food delivery booms as changing eating habits of young consumers, FIFA fuels demand
Swiggy added 1.3 million monthly transacting users during the quarter, its highest addition in five. The company is expecting the next three months to see double-digit sequential net order value growth, while remaining cautious on intensifying competition which is not seen to be easing anytime soon.
Profitability depends on scale
Swiggy's break-even target for Instamart remains a longer-term milestone. The company said it needs around 2.3 times its current scale or an annualised net order of Rs 60,000 crore as compared to Rs 26,400 crore currently. It also needs contribution of Rs 30 per order to reach adjusted EBITDA break-even.About 67% of the required improvement is expected to come from higher revenue for every order through product mix, private brands and advertising. The remainder is expected from lower cost per order through de-intensifying network, automation and operating leverage.
The transition in inventory could help Swiggy improve its margins and operating control, but will not itself be enough to scale the business' profitability.
Food delivery guidance holds
Swiggy's core food-delivery business paints a better picture of the company's profitability. Gross order value grew 17.7% to Rs 10,054 crore while adjusted EBITDA reached a record Rs 341 crore. Adjusted EBITDA margin rose to 3.4% of gross order value.It maintained full-year guidance for food-delivery gross order value growth of 18% to 20%, excluding its new budget-meal offering, Toing. Swiggy added that growth in its core platform crossed 20% in September, with over 20 million transacting users.
The company further sees margins in its food delivery business to move towards its early mentioned adjusted EBITDA margin target of 5%. Monetisation led by advertisements, higher order density and shorter-distance deliveries have helped the company lift its bottom-line.
Toing could provide additional growth, with Swiggt mentioning the combined food-delivery marketplace could potentially grow 25% to 30% if the standalone budget-meal app grows. Swiggy, however, said it requires another one to two quarters to gain greater clarity on the model's effectiveness.