Swiggy food delivery margins improve as Instamart losses approach peak

Investment View and Key Takeaways

ICICI Securities’ October 23, 2026 results update maintains a BUY rating on Swiggy. The broker expects sequential growth to improve in Q2FY27 and believes quick-commerce losses have peaked. Food delivery margin expansion remains a central positive, while quick commerce could deliver sequential EBITDA-margin gains in H2FY27 as discounts reverse over the next few quarters and the Indian-owned-and-controlled entity transition is implemented in Q3FY27.

Q2FY27 Consolidated Performance

Swiggy reported Q2FY27 revenue of Rs 75.7 billion, up 11.1 per cent quarter on quarter and 36.1 per cent year on year, and 4.7 per cent above ICICI Securities’ estimate. EBITDA loss widened to Rs 7.7 billion from Rs 6.5 billion in Q1FY27. EBITDA margin was negative 10.2 per cent, down 63 basis points quarter on quarter but up 418 basis points year on year. Net loss was Rs 9.2 billion.

Food Delivery: Growth and Margin Expansion

Food delivery GOV reached Rs 100.5 billion, rising 5.9 per cent quarter on quarter and 17.7 per cent year on year. Adjusted revenue was Rs 26.2 billion and adjusted EBITDA was Rs 3.4 billion, representing a 3.4 per cent margin on GOV. The margin increased by 30 basis points quarter on quarter and 60 basis points year on year.

Management said food delivery growth accelerated to more than 20 per cent year on year in September 2026 and retained FY27 growth guidance of 18 to 20 per cent excluding Toing. Advertising monetisation, delivery-cost efficiencies, and higher penetration of Bolt and 99-Store supported profitability. Bolt and 99-Store together accounted for more than 25 per cent of food-delivery volumes.

Management is targeting a steady-state adjusted EBITDA margin of 5 per cent of GOV.

Quick Commerce: Instamart Performance and Break-even Path

Instamart GOV grew 16.7 per cent quarter on quarter and 31.4 per cent year on year to Rs 92.3 billion. Quick-commerce NOV grew 13.4 per cent quarter on quarter, supported by 1.3 million additional monthly transacting users, user-reactivation pricing, differentiated assortment and network expansion.

Swiggy added 69 net stores in Q2FY27, taking the network to 1,240 stores in 133 cities. Orders per store per day rose 9.5 per cent quarter on quarter to 1,192. Contribution margin declined by 82 basis points quarter on quarter to negative 1 per cent of GOV because of reactivation investment and adverse mix.

Management expects about 100 basis points of sequential improvement in adjusted EBITDA margin in Q3FY27 and has guided contribution margin at zero to negative 1 per cent. The stated break-even path requires annualised NOV of Rs 600 billion, compared with Rs 264 billion currently, and contribution of Rs 30 per order. Management expects inventory ownership following the entity transition to provide about 80 basis points of net-margin benefit.

Out-of-home Consumption and Supply Chain

Out-of-home consumption GOV rose 34.9 per cent year on year, while active restaurants increased 48 per cent to 66,000. The business has been adjusted EBITDA-positive for seven consecutive quarters, with Dineout present in more than 80 cities.

Swiggy agreed to sell its Lynks Logistics stake to Udaan’s parent for about Rs 5 billion and invest Rs 750 million in Udaan. ICICI Securities estimates that the exit could improve Supply Chain and Distribution EBITDA by about Rs 200 million per quarter from Q3FY27.

Estimates, Valuation and Target Price

ICICI Securities cut its FY27E and FY28E revenue estimates by 2.8 per cent and 4.0 per cent, respectively. The broker reduced FY27E EBITDA to a loss of Rs 22.5 billion and FY28E EBITDA to a profit of Rs 3.0 billion.

The target price was reduced to Rs 400 from Rs 520, using a three-stage discounted cash flow valuation. The reduction reflects a 100 basis point increase in WACC and a fully diluted share count that includes unvested employee-trust shares.

Key Risks

• A slowdown in discretionary spending.
• Negative externalities that disrupt operations.