Swiggy Limited

Swiggy reported a robust Q2 FY26, with the quick commerce business achieving over 100% GOV growth for the third consecutive quarter, significantly exceeding initial expectations of 50-60%. The food delivery business continued its profitable growth trajectory, reaching an annual run rate of INR 1,000 crores. Overall, the company demonstrated strong financial health, with adjusted revenue per order improving by INR 10 in both Q1 and Q2, and a very strong cash reserve position.

The quick commerce segment saw its Contribution Margin improve by 200 basis points quarter-on-quarter, reaching -2.6% at a portfolio level. This improvement was attributed to monetization levers, operating leverage, and better utilization of stores. Non-grocery items now contribute 26% to quick commerce, up from 9% a year ago, driven by initiatives like the Quick India Movement. Management expects margins to continue improving, targeting a 4% EBITDA with a 7% CM positive trajectory in the medium term.

The food delivery business maintained its profitable growth, with EBITDA improving by 44 basis points quarter-on-quarter and more than doubling year-on-year. The segment is currently operating at an annual run rate of INR 1,000 crores. Management guided for a medium-term EBITDA margin of 5% and expects advertisement revenue to reach 6-7% in a steady state, indicating further monetization potential from its established user base.

Swiggy possesses very strong cash reserves, further bolstered by positive cash accruals from the food delivery business and anticipated proceeds from the Rapido stake sale. The company plans to raise additional capital through a Qualified Institutional Placement (QIP) at the holding company level. This capital is intended for growth, strategic reserves, and funding innovation, with management stating they do not expect to need further capital after this QIP.

The company's quick commerce store network is designed to support double the current orders without significant new store additions, with this capacity expected to be utilized within a year. Swiggy continues to experiment with new services and categories, such as pharmacy, which has shown robust growth. The focus remains on densifying the network in existing cities and leveraging innovation to drive higher average order values and customer frequency.

Competitive intensity in both food delivery and quick commerce remains high, particularly on subscription platforms. Management acknowledged competitor activities, including capital raises and dark store additions, but emphasized their focus on sustainable growth and unit economics. They noted that while competition is dynamic, Swiggy aims to make strategic choices to attract and retain customers, believing they are in control of their destiny.