- You missed Swiggy’s profit surge—now’s the moment to act.
- Revenue rose 54.6% YoY, beating estimates, while food‑delivery margin edged higher.
- Instamart’s sales doubled, but margins remain deeply negative, raising cash‑flow concerns.
- Motilal Oswal values the food‑delivery arm at 35x FY27E EV/EBITDA, implying ~34% upside.
- Sector peers are tightening cost structures; Swiggy’s next moves could dictate market leadership.
You missed Swiggy’s profit surge—now’s the moment to act.
Swiggy’s Q3 FY26 Revenue Explosion: Numbers That Matter
Swiggy reported INR 61.5 billion in revenue for the third quarter of FY26, a 54.6% year‑over‑year jump that comfortably outpaced Motilanalysis’s INR 57.7 billion estimate. The surge was driven primarily by its core Food Delivery (FD) segment, which posted a 20.5% growth in gross order value (GOV). While the headline number dazzles, the real story lies in the composition: FD contributed the bulk of the revenue, while Instamart—a hyper‑local grocery arm—added a staggering 103% YoY increase in GOV, reaching INR 79.3 billion.
Margin Dynamics in Food Delivery – Why 7.6% CM Is a Red Flag or Green Light
The contribution margin (CM) for the FD business ticked up 30 basis points QoQ to 7.6%. A higher CM indicates that each rupee of sales is leaving a larger share for covering fixed costs and eventually profit. However, a 7.6% figure is still modest for a high‑volume, low‑margin industry. The adjusted EBITDA margin rose to 3.0% from 2.8% in the prior quarter, surpassing the consensus estimate of 2.9%. This incremental improvement suggests Swiggy is extracting efficiencies—perhaps through better courier utilization or pricing power—but the margin ceiling remains low, leaving little cushion against price wars.
Instamart’s Double‑Digit Growth: The Hidden Cost of Negative Margins
Instamart’s meteoric 103% GOV growth is impressive, yet its contribution margin slipped to -2.5%, widening by 9 basis points QoQ. The adjusted EBITDA margin deepened to -11.4%, missing the -9.9% consensus. Negative margins signal heavy subsidies, inventory costs, and logistics spend needed to win market share. The strategy mirrors a classic “loss‑leader” approach: capture users now, monetize later through cross‑selling and higher order frequencies. Investors must watch cash‑burn trends; sustained losses could pressure the balance sheet unless offset by cash from the FD arm.
Sector Pulse: How India’s Food‑Delivery Landscape Is Evolving
The Indian food‑delivery market, valued at over $12 billion, is entering a consolidation phase. Consumer preferences are shifting toward bundled services—food, groceries, and quick‑commerce—forcing platforms to diversify. Regulatory pressures on commission rates and rising labor costs are squeezing margins across the board. Yet, the total addressable market (TAM) continues to expand as internet penetration deepens, especially in Tier‑2 and Tier‑3 cities, creating tailwinds for volume‑driven players.
Competitor Lens: Zomato, Uber Eats, and the Race for Profitability
Zomato, Swiggy’s chief rival, reported a FY26 FY‑ending EBITDA margin of 2.1%, slightly ahead of Swiggy’s FD margin but still far from sustainable profitability. Uber Eats has been scaling back its Indian operations, leaving a gap that Swiggy can exploit. Both peers are investing heavily in cloud kitchens and AI‑driven dispatch to trim delivery times and cost per order. Swiggy’s 30‑bp CM improvement shows it is keeping pace, but the competitive intensity means any margin erosion will be quickly capitalized on by rivals.
Historical Echoes: Past Delivery Giants’ Turnarounds
Look back at 2019‑2021 when Uber’s U.S. Eats segment shifted from aggressive discounts to a “profit‑first” model, boosting its adjusted EBITDA margin from -15% to +4% within 18 months. Similarly, DoorDash’s 2022 focus on “Dark Stores” lifted its contribution margin by 70 basis points. These precedents illustrate that a disciplined cost‑control regime, paired with ancillary services, can flip the profitability curve. Swiggy’s current trajectory mirrors these turnarounds, but execution risk remains high.Technical Note: EV/EBITDA (Enterprise Value to EBITDA) is a valuation multiple that compares a firm’s total value—including debt and cash—to its earnings before interest, taxes, depreciation, and amortisation. A 35x multiple indicates the market is pricing in strong growth expectations, but it also raises the bar for earnings delivery.
Valuation Mechanics: 35x FY27E EV/EBITDA Explained
Motilal Oswal applies a 35x FY27E EV/EBITDA multiple to Swiggy’s FD business, supplemented by a discounted cash flow (DCF) overlay. Assuming FY27E EBITDA of INR 1.3 billion, the implied enterprise value is roughly INR 45.5 billion for the FD segment alone. Adding the Instamart valuation (adjusted for its negative margins) yields a total equity value that translates to a target price of INR 440 per share—about a 34% upside from the current market price.
Investor Playbook: Bull vs. Bear Cases on Swiggy
Bull Case: Continued revenue acceleration in both FD and Instamart, coupled with margin expansion from operational efficiencies, drives EBITDA to exceed FY27E forecasts. The 35x EV/EBITDA multiple compresses as the market rewards profitability, propelling the stock toward INR 500+. Strategic partnerships (e.g., with cloud‑kitchen operators) and a successful rollout of subscription services add recurring revenue streams.
Bear Case: Instamart’s loss‑making model drains cash, forcing Swiggy to raise capital at unfavorable terms. Competitive pressure erodes FD margins further, pushing CM below 6% and EBITDA back into negative territory. Regulatory caps on commissions reduce top‑line growth, while rising labor costs inflate operating expenses. In this scenario, the stock could slip below INR 300, aligning with peers who have struggled to achieve profitability.
Bottom line: Swiggy stands at a pivotal inflection point. The next few quarters will reveal whether its growth engine can be harnessed into sustainable earnings or whether the margin squeeze will outweigh the top‑line allure. Align your exposure with your risk tolerance, and keep a close eye on the margin trends that Motilal Oswal highlights.