Swiggy plans to bulk up cash reserves for Instamart as losses widen in Q2

Bengaluru: Swiggy Ltd reported another unprofitable quarter this fiscal, weighed down by increased spending on its quick commerce arm Instamart, highlighting the tough road to profitability in rapid delivery.

Swiggy’s net loss widened to ₹1,092 crore against ₹626 crore in the year-ago period. It reported an operating revenue of ₹5,561 crore, a 54.4% year-on-year jump, surpassing ₹5,280 crore average estimate of analysts surveyed by Bloomberg.

The company is mulling raising up to ₹10,000 crore through a qualified institutional placement (QIP) and other permissible routes to fortify its balance sheet and maintain flexibility in India’s fiercely competitive quick commerce market. This comes almost a year after listed rival Eternal Ltd raised ₹8,500 crore via QIP, and less than two weeks after Zepto raised $450 million in private capital from California Public Employees' Retirement System (CalPERS).

According to Swiggy, the planned fundraise is a strategic move to strengthen its balance sheet and stay nimble amid rising competition from well-capitalised rivals. “Our cash reserves today are very strong,” Sriharsha Majety, co-founder and group CEO of Swiggy, said in the call with analysts. “The additional capital we plan to raise is more for maintaining flexibility, not out of necessity. We don’t expect to raise further funds after this unless we see exceptional opportunities or industry shifts that warrant it.”

“Instamart continues to scale efficiently, improving margins even as we invest in growth. Food delivery is showing steady recovery, and we remain confident in our path to sustainable profitability over the coming quarters,” Sriharsha Majety, co-founder and group CEO of Swiggy, said in the September quarter’s shareholder letter.

Rahul Bothra, Swiggy’s chief financial officer, said the QIP will serve as a strategic reserve to support future growth. “The sector continues to attract a lot of capital—from both new and legacy players—so this conversation with the board is aimed at raising additional capital that will serve as both growth capital and a strategic reserve going forward,” he said.

Both executives underscored that Swiggy’s existing cash position, including proceeds from its partial exit from Rapido, is sufficient to fund its current growth plans. The QIP, they said, is a way to ensure financial headroom and agility as competition in the quick commerce segment intensifies.

The race in the quick commerce space has been heating up, highlighting the need for top companies to keep up with the fast expansion of dark stores as well as evolving consumer needs. Zepto, another player in the segment, raised about $450 million this month, valued at 7 billion, indicating the smaller rival’s interest in expanding rapidly in this space. Blinkit, the quick commerce arm of Eternal, saw the highest cash burn compared to the previous quarters to establish 272 dark stores. It spent about ₹1,038 crore, which is 94% of the funds it allocated during the quarter for expanding its dark-store network.

Battle of dark stores

Swiggy has four main businesses: food delivery, out-of-home consumption, quick commerce and supply chain and distribution. Of the ₹5,561 crore in revenue, the supply chain and distribution contributed to about 46% or ₹2,560 crore. The food delivery business was the second-highest contributor at about 34.5% or ₹1,923 crore. Then comes the quick commerce business, which contributed 17.6% or ₹980 crore. The out-of-home consumption generated 88 crore, followed by platform innovations that contributed about ₹12 crore.

Food delivery, out-of-home consumption and quick commerce are the business-to-consumer (B2c) segments, whereas supply chain and distribution are the business-to-business (B2B) focused.

Of the three B2C businesses, the quick commerce business posted the highest year-over-year growth. Instamart, which delivers everyday essentials from milk to groceries, saw its revenue double from the year-ago period. The company added just 40 new dark stores, taking its total count to 1,102 across 128 cities. This is much slower than its larger rival, Eternal, which added 272 stores during the September quarter, taking its dark stores to 1,816, and aims to establish 3,000 stores by March 2027.

To be sure, even though the number of dark stores for Bengaluru-based Swiggy is less than its Gurugram-based rival, it has an upper hand as each of its dark stores clocks 800-1,000 orders per store per day, because of its megapods, which are about 4,000 + sq ft. These large-sized dark stores facilitate the storage of non-grocery items, which now make up about 26% of the gross order value (GOV)--the total value of all customer orders placed on Swiggy’s platforms before discounts, commissions, and other costs are deducted.

By comparison, a typical Blinkit store is about 2,000-3,000 sq ft. “For this reason, despite Instamart’s smaller store network, it delivers comparable order volumes–underscoring higher store productivity and capital efficiency,” said Sandeep Abhange, research analyst, consumer and mid-caps at LKP Securities.

The company’s management reiterated the breakeven guidance for Instamart before June 2026, backed by operating leverage and scaling basket size.

Swiggy's larger peer Blinkit’s parent Eternal expects a 1% rise in net margin from its new business model over four to six quarters. However, analysts told Mint this could take two to three quarters longer amid intensifying competition. Eternal is also likely to face pressure to ramp up dark store investments and advertising spends; each store costs about ₹1 crore in fixed expenses, according to its latest shareholder letter.

Food delivery ‘steady’

Swiggy's food delivery business was the next highest revenue growth driver. This comes on the back of higher platform fees and better delivery cost optimisation.

The segment generated a revenue of ₹1,923 crore, compared with Eternal’s food delivery business revenue of ₹2,485 crore.

“The food delivery business showed steady performance during the quarter with sequential GOV growth and stable margins. Average order values and order frequency remained steady, driven by resilient demand from our core urban users. The growth in smaller towns, however, remains gradual,” according to Swiggy’s September shareholder letter.

The company has doubled down on its food delivery business by introducing niche verticals to target different audience segments, launching three new food services this year. Snacc, which debuted in January 2025, is Swiggy’s Gen Z-focused snacking brand that sells packaged and ready-to-eat snacks through Instamart and select retail stores. It aims to tap into the fast-growing impulse snacking market with playful branding and healthier product options.

This was followed by Desk Eats, launched earlier this year as part of Swiggy’s out-of-home Consumption vertical, which offers pre-scheduled, affordable lunch boxes for office-goers in business hubs like Bengaluru, Gurugram, and Hyderabad. The service is designed to turn weekday lunch breaks into a regular Swiggy habit.

The third offering, Toing, rolled out in mid-2025, caters to small gatherings and celebrations by curating ready-to-serve party platters and mini catering menus from local restaurant partners.

The out-of-home consumption saw revenue grow by 49% to ₹88 crore in the September quarter. This segment still lags behind Eternal’s going-out platform called District, which clocked ₹189 crore in revenue during the September quarter.

“Overall, Swiggy’s September quarter print signals a decisive shift—from growth-at-any-cost to growth-with-discipline,” said Abhange. “The company’s sharper focus on cost control and operating leverage positions it as one of the most efficient players in India’s hyper-competitive quick commerce landscape.”

Ahead of its earnings, Swiggy’s shares ended 0.2% lower at ₹418.1 apiece on the BSE on Thursday compared with a 0.7% decline in the benchmark Sensex.