Swiggy shares crack 11% to 8-week low, post worst 1-day drop since listing. Here’s why

Swiggy, the popular food delivery aggregator, saw its shares tumble 11 per cent in Tuesday’s trade (January 21), hitting an 8-week low of ₹427 apiece after the company’s director competitor Zomato posted a weak set of numbers for the December ending quarter, raising concerns among investors.

Today’s drop was the biggest intraday fall for the stock since its listing in November last year. Additionally, the decline has brought the stock to trade near its listing price of ₹420 apiece. At current levels, the stock is trading 11% above its issue price of ₹390 apiece.

Following the weak set of numbers, analysts cut their target price on Zomato, causing the stock to tumble by 13.3% to hit a 6-month low of ₹207.80 apiece. The negative sentiment also spilled over to its rival, Swiggy. 

Zomato’s profitability tumbled by 57.3% YoY in Q3FY25 to ₹59 crore, primarily attributed to increased investments in accelerated new dark-store openings and customer acquisition efforts in the quick commerce (QC) business.

Blinkit remained loss-making, reporting a net loss of ₹103 crore in the quarter and the company expects it will remain loss-making in the near-term as it accelerates its investments for store expansion.

The company’s adjusted EBITDA as a percentage of GOV nearly broke even in 2QFY25 before reporting a 1.3% loss in 3QFY25. With the ramp-up of dark stores, analysts now expect this loss to widen in the short term before breaking even in 4QFY26E. As a result, analysts have reduced their PAT estimates by 25% for FY25-27.

Competition in the QC segment is heightening as companies focus on expanding their presence across multiple locations, resulting in a burning of cash. Zomato expects Blinkit to reach the 2,000-store mark by December 2025, a full year ahead of its original target of December 2026.

Swiggy runs its QC business through Instamart, and other players in the same segment include startup Zepto, as well as, deep-pocketed rivals such as Walmart-backed Flipkart and Tata Group-backed BigBasket.

Looking at the long term, analysts remain positive on the Quick Commerce segment, as they believe it offers a generational opportunity to participate in the disruption of industries such as retail, grocery, and e-commerce.

In terms of valuation, analysts feel that Swiggy’s shares are trading more inexpensively than those of Zomato. Earlier, global brokerage firm UBS said the Swiggy stock is priced at a 35 per cent to 40 per cent discount to Zomato.

Meanwhile, analysts had earlier highlighted that Swiggy’s volume growth has improved in CY24, which lagged behind Zomato’s in CY23, causing the gap between the two in terms of volume growth to narrow meaningfully.

In addition, analysts also noted that Swiggy’s strategic advantage lies in its all-in-one app approach, which enables seamless cross-utilisation of services and drives operational efficiency. They believe this integrated approach could be a key differentiator as the company navigates both the food delivery and quick commerce sectors.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions