According to Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, Swiggy's recent Rs 10,000 crore fundraise is unlikely to lead to a new wave of deep discounting in the food-delivery market. Instead, the funds will likely be used to support calibrated expansion and a clearer path to profitability.
Khemka believes that the worst phase of discounting in the sector is now behind, and even companies like Zepto, which had been at the forefront of discount-led competition, are now focusing on profitability as they prepare for an IPO. This signals a more mature competitive landscape in the food-delivery space.
The competition is still present, but it's much more matured, says Khemka. He expects the bulk of the funds to be directed towards calibrated capex expansion rather than uneconomic promotional spends.
Khemka argues that there is much more room for upside in Swiggy compared to other listed players in the space. The company is transitioning towards profitability, supported by operating leverage and improving efficiency in its core food-delivery business.
Additionally, Swiggy's quick-commerce arm, Instamart, is showing strengthening trends, with its Gross Order Value (GOV) improving on a sequential basis. Motilal Oswal expects Instamart to achieve break-even by the first quarter of FY27, which could drive further rerating of the stock.
Motilal Oswal has a 'Buy' rating on Swiggy with a target price of Rs 550, citing the company's execution track record and stronger capital base following the fundraise.
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