Swiggy food delivery margins improve while Instamart profitability path extends

Investment View and Target Price

Motilal Oswal’s October 22, 2026 2QFY27 results update on Swiggy retains a Buy rating but lowers the target price to Rs 280. The broker’s central concern is that Swiggy is ceding ground to competition across both food delivery and quick commerce. While Motilal Oswal continues to see strategic value in Swiggy’s food delivery franchise and brand recall, it believes that a clear route to quick commerce EBITDA profitability is essential for a meaningful re-rating.

2QFY27 Financial Performance

Net revenue grew 11.1 per cent QoQ and 36.1 per cent YoY, exceeding Motilal Oswal’s estimate. For 1HFY27, revenue grew 36.7 per cent YoY, while adjusted EBITDA losses narrowed to Rs 1,400 crore from Rs 1,500 crore in 1HFY26.

Food Delivery Performance

Food delivery GOV was Rs 10,050 crore, up 17.7 per cent YoY and broadly in line with the broker’s Rs 10,070 crore estimate. Food delivery adjusted EBITDA was Rs 340 crore, in line with estimates, while the adjusted EBITDA margin expanded 30 basis points QoQ to 3.4 per cent of GOV. Food delivery contribution margin was about 7.7 per cent of GOV.

Management reiterated its path to a 5 per cent steady-state food delivery EBITDA margin without pricing action or margin dilution. It retained FY27 food delivery GOV growth guidance of 18 to 20 per cent excluding Toing, with September growth returning above 20 per cent.

Motilal Oswal sees potential food delivery cannibalisation from Toing despite its value-led proposition expanding the addressable market. The broker forecasts food delivery GOV growth of about 18 per cent in FY27 and 17 per cent in FY28.

Instamart Performance and Profitability

Instamart GOV was Rs 9,230 crore, up 31.4 per cent YoY and ahead of Motilal Oswal’s Rs 9,050 crore estimate. However, NOV of Rs 6,600 crore was slightly below the Rs 6,700 crore estimate.

Instamart added 69 active dark stores during the quarter, taking the network to 1,240 stores across 133 cities. Orders per dark store per day increased about 9.5 per cent QoQ to around 1,192. Instamart’s contribution margin declined around 82 basis points QoQ to negative 1.0 per cent of GOV as its take rate fell around 140 basis points.

Instamart’s adjusted EBITDA loss was Rs 890 crore, worse than the broker’s Rs 860 crore estimate. Adjusted EBITDA margin was negative 13.7 per cent of NOV against the estimated negative 12.8 per cent. Management guided for double-digit QoQ NOV growth in 3QFY27, contribution margin of zero to negative 1 per cent and around 100 basis points QoQ EBITDA-margin improvement.

The inventory-led IOCC transition is expected to take two to three quarters. Management expects around 80 basis points of contribution-margin benefit and an eight to 10-day improvement in working capital from the transition.

Growth Outlook and Competitive Position

Motilal Oswal reduced its FY26 to FY30 Instamart NOV CAGR assumption to 32 per cent from 38 per cent because growth is slower than Blinkit amid elevated competition. In 1HFY27, Instamart NOV growth was about 37 per cent against Blinkit’s about 83 per cent. Instamart had 1,168 orders per dark store per day in 2QFY27 versus Blinkit’s 1,611.

Motilal Oswal expects 2HFY27 revenue growth of 27.6 per cent, but forecasts adjusted EBITDA losses to increase to Rs 1,490 crore from Rs 1,360 crore in the prior-year period.

Estimate Changes and Key Risks

The broker cut FY27E and FY28E revenue estimates by 1.1 per cent and 7.2 per cent, respectively, and lowered FY27E and FY28E EBITDA margins by 238 basis points and 603 basis points.

Key risks to the thesis include:

• Sustained competitive intensity.
• Slower quick commerce growth.
• Delayed operating leverage.
• Persistent Instamart losses.
• Potential cannibalisation of core food delivery by Toing.

Valuation Framework

The Rs 280 target price is based on a sum-of-the-parts valuation. Motilal Oswal values food delivery at 32 times FY28E EV/EBITDA, other businesses—including out-of-home consumption, platform innovations and supply chain—at 1 time FY28E EV/sales, and quick commerce through DCF.

The DCF assigns negative Rs 5 per share to quick commerce, reflecting its extended path to profitability. The broker assumes a 12.5 per cent WACC and a 4.5 per cent terminal growth rate for quick commerce.