Swiggy’s GMV reaches $1.43 billion in 1H24; here’s what brokerages say

Food-Tech Review: Domestic brokerages have conducted comparisons between food-delivery tech companies, Swiggy and its rival Zomato, following global investment firm Prosus's review report on Swiggy.

Swiggy's core food delivery business grew 17% and delivered gross merchandise value (GMV) of $1.43 billion in the first half of FY24, reported CNBC-TV 18 citing Prosus.

"Core food-delivery EBITDA losses in 1H24 (the first half of the 2024 fiscal) shrunk 89%, led by improvements in contributing margin and operating leverage. Combined, these reflect customers' willingness to pay for convenience, and restaurants' willingness to advertise for growth," reported CNBC-TV 18 citing Prosus.

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The food-tech giant's losses dropped to $208 million from $321 million the year before, according to Prosus, which owns a 32.7% stake in the company, said the news report.

Also Read: Zomato Q2 Results: Net profit at ₹36 crore, revenue up 72% to ₹2,848 crore

Prosus went on to say that order growth was driven by customer adoption, which helped Swiggy's quick-commerce business advance quickly. Inflation was far behind the growth in basket sizes. The GMV growth of Instamart was fueled by a 19% increase in stores at the end of June.

“With the platform focused on gaining scale and moving towards profitability in the 25 cities where it operates, Instamart’s first-half contribution losses fell by around 75%. Broader product selection, densification of the store network and faster delivery times have continued to aid customer acquisition and retention," said CNBC-TV 18 citing Prosus.

Also Read: Ant Group’s Alipay to exit Zomato in $395 mn block deal

Here's what brokerages say

JM Financial

According to the brokerage house, Swiggy gains share, Zomato superior in execution. The brokerage said that Swiggy's relative market share advantage over Zomato in the food delivery (FD) business may have shrunk by c.30bps HoH / 80bps YoY in 1HCY23, based on Prosus's results. Zomato maintained its lead position with a roughly 54.0% relative market share, despite Swiggy's well-deserved gains. Additionally, Zomato's share loss during this time frame may have resulted from a few business choices, like the temporary suspension of its loyalty membership programme and the closure of operations in roughly 225 cities.

Moreover, Prosus's analysis indicates that the vertical remained loss-making in 1HCY23, despite Swiggy's statement that its FD business (excluding ESOPs) had turned profitable in March. This suggests that there was a trade-off between share gain and profitability. It is important to highlight that Zomato's adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) profit for its FD business during this time was ₹2.59 billion.

"Recent results suggest Swiggy’s gains in the FD vertical were partly attributable to Zomato’s diversion in focus towards profitability. These trends may not be sustainable in the long run, as at some point of time Swiggy too aspires to become a listed entity, in which case it would have to demonstrate significant improvement in profitability. Moreover, Swiggy, on a consolidated basis, has been reporting significantly higher absolute losses. This leads us to believe that Zomato has been far superior in execution vs. Swiggy," the brokerage said.

Also Read: Zomato lands in controversy as it retracts ₹1.6 crore salary job offer in IIT Delhi

Nuvama Institutional Equities 

Zomato and Swiggy are neck and neck in the Indian food delivery market, which is clearly a duopoly, according to the brokerage. Zomato has increased its market share in the last two years for food delivery. Given the fierce competition, market share is still to be seen. Quick commerce will be the main driver of Zomato's overall revenue growth. Swiggy is in a similar situation due to its larger opportunity and lower base.

"We believe incremental surprise on both revenue growth and profitability would come from the quick commerce business. Zomato has already committed to invest around $220 million to expand dark store count. Furthermore, Zomato has guided to turn adjusted EBITDA profitable in Blinkit by Q1FY25," the brokerage said.

Also Read: GST notice of ₹400 crore sent to Zomato, ₹350 crore to Swiggy: Report

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