Swiggy is Down 40% from its All-Time High. Buy the Dip or Stay Away?

The Indian stock market traded on a bearish note during Tuesday's session, tracking a sharp overnight decline in Wall Street, where the S&P 500 and Nasdaq dropped around 3% and 4%, respectively.

The US market, which saw a buying trend from January to February, witnessed a significant correction in March.

The primary concern?

The risk of a global trade war escalates due to Trump's firm stance on imposing stringent tariffs on foreign nations. In response, China has already retaliated with countermeasures.

However, the latest market downturn was driven by fears of an economic slowdown after President Donald Trump did not rule out the possibility of a recession due to his tariff policies.

This was enough to drag the S&P 500 and Nasdaq Composite to their lowest levels since September last year.

With the market facing selling pressure, several recently listed stocks are now trading near their IPO prices, including Swiggy.

About Swiggy

Swiggy, one of India's leading online food delivery platforms, was founded in 2014 and has grown into a diversified hyperlocal services provider.

Initially focused solely on food delivery, the company has expanded into quick commerce, grocery delivery, and hyperlocal logistics.

Swiggy's platform also facilitates restaurant reservations through Dineout and event bookings via SteppinOut.

Additionally, the company offers a membership program called "Swiggy One," which provides discounts and exclusive offers, along with various in-app payment solutions.

Swiggy made its market debut on 13 November 2024 at Rs 412, which as of 11 March 2025 is down more than 14% to Rs 352.

In 2025, the company's shares have declined over 35%.

From its peak of Rs 617, on 23 December 2024, the stock has plunged more than 40%.

In this article, we will explore the factors weighing down the stock.

#1 Profitability Concerns

In the December 2024 quarter, revenue rose 31% to Rs 39.9 bn, compared to Rs 30.5 bn a year back. Swiggy's overall gross order value (GOV) grew 38% to Rs 121.7 bn compared to the year-ago period.

On the operational front, Swiggy's earnings before interest, taxes, depreciation, and amortization (EBITDA) loss in the December quarter rose to Rs 7.3 bn, compared to Rs 5.3 bn.

Its net loss widened 39% to Rs 7.9 bn. The loss was higher than Rs 5.2 bn a year back. Margins took a hit due to aggressive dark store expansion and increased competitive intensity.

The management cautioned that industry growth could slow despite recent consumption-driven tailwinds. This further dampened market sentiment, pulling the stock lower.

#2 Quick Commerce Competition

Swiggy Instamart added 96 dark stores in Q3FY25, averaging 1.06 per day, but lagged behind Blinkit, which added 216 stores at 2.4 per day.

By the end of the quarter, Swiggy had 705 dark stores, while Blinkit led with 1,007. Revenue-wise, Blinkit generated Rs 1.4 billion (bn), significantly ahead of Swiggy's Rs 5.8 bn.

To close the gap, Swiggy aims to reach 1,000 dark stores by March 2025, competing with Blinkit, Zepto, Flipkart Minutes, and BigBasket. Zepto is also expanding rapidly, targeting 1,200 stores by March 2025, while Blinkit advanced its 2,000-store goal to December 2025.

Swiggy has accelerated its expansion, adding 86 stores from April to September and another 96 in Q3FY25. In January 2025 alone, it added 86 more stores. Despite these efforts, competition remains intense, with all major players aggressively expanding.

Swiggy's investments in quick commerce, including dark store expansion and marketing, are crucial for growth. However, the rising competition and aggressive expansion by rivals have weighed on stock performance, making the sector highly competitive.

Swiggy vs Blinkit: Quick Commerce Growth Comparison (Q3FY25)

Metric	Swiggy Instamart	Blinkit (Zomato)
Dark Stores Added (Q3FY25)	96	216
Average Daily Store Additions	1.06	2.4
Total Dark Stores (End of Q3FY25)	705	1,007
Targeted Dark Stores (March 2025)	1,000 by March 2025	2,000 stores by December 2025

#3 Falling Market Share

India's online food delivery market is now dominated by Zomato, which holds a 58% market share, while Swiggy trails at 42% as of Q1 FY25.

This marks a significant shift from 2018 when Swiggy led with 61.2%, but over time, Zomato has overtaken its rival. In FY24, Zomato's market share stood at 56-57%, while Swiggy's dropped to 40%, largely due to Zomato's acquisition of Uber Eats, which strengthened its position.

Zomato has also gained an edge through better execution, particularly with its acquisition of Grofers (now Blinkit), whereas Swiggy developed its quick commerce platform in-house.

Despite being an early mover in the space, Swiggy has lost ground to Blinkit and Zepto. This long-term decline in market share has added further pressure on the stock.

#4 Customer Acquisition Pangs

Swiggy is facing increasing challenges in onboarding new customers, with overall order volumes showing minimal growth. Industry experts note that the platform has already penetrated key markets, making it difficult to attract fresh users.

Instead, much of its recent growth has come from margin improvements rather than a rise in customer additions.

Swiggy's average monthly transacting customers (MTCs) saw only a marginal increase from 14.7 m in Q2 FY25 to 14.9 m in Q3, a slower growth trajectory compared to the previous year when MTCs stood at 12.5 m.

The company acknowledged that most of its food delivery growth in Q3 was driven by improved contribution margins, operational efficiencies, and advertising rather than an expansion of its user base.

Another factor contributing to Swiggy's stagnation is rising platform fees and other costs, which have impacted demand.

As prices increase, customers are becoming more selective about ordering online, slowing the platform's ability to scale.

Moreover, Swiggy has struggled to grow beyond India's top eight cities, with over 80% of its business concentrated in these urban centers. Expanding to smaller cities remains a challenge, as food delivery adoption has been slower outside the metro areas.

#5 10-Minute Services May Not Deliver

To counter the slowdown, Swiggy has experimented with new models, including 10-minute food delivery services. It launched Snacc, a quick food delivery app, and has been expanding its Bolt service, which now accounts for 9% of overall food orders-up from 4% in the previous quarter.

However, industry observers argue that these efforts have not significantly increased total orders but have merely shifted existing ones into the faster delivery model.

Even Zomato's CFO recently stated that 10-minute food delivery has yet to make a material impact on the food delivery business, reinforcing concerns that such initiatives may not drive substantial revenue growth.

What Next?

Going forward, Swiggy has announced plans to raise up to Rs 10 bn through a rights issue in multiple tranches. The capital will be allocated towards expanding its wholly-owned subsidiary, Scootsy Logistics, which focuses on supply chain and distribution services.

Despite facing market share challenges, MD & Group CEO Sriharsha Majety remains optimistic about the long-term growth prospects of Swiggy's food delivery business.

He anticipates a substantial improvement in margins, driven by operating leverage and steady enhancements in unit economics. Majety expects margins to move closer to 5%, a significant jump from the current sub-1% levels.

Additionally, Swiggy has expanded its food delivery services in collaboration with IRCTC, now covering 100 railway stations across 20 states. The company aims to further extend its reach across more railway stations in the coming months, strengthening its presence in this segment.

Conclusion

India's food delivery market is set to exceed Rs 2 trillion by 2030, expanding at a compound annual growth rate of 18%, as highlighted in a joint report by Bain & Company and Swiggy.

The share of online food services in the overall market is projected to grow from 12% to 20% over the next seven years, driven by increasing digital adoption and evolving consumer preferences.

Additionally, India's broader food services market-which encompasses dining out, food delivery, and other non-home-cooked segments-is expected to double, reaching Rs 9-10 trillion (tn) from the current Rs 4-5 tn.

This growth trajectory underscores significant opportunities for Swiggy, particularly as it focuses on enhancing its market position, optimizing operations, and expanding its quick commerce and food delivery verticals.

While challenges persist, including intensifying competition and customer acquisition hurdles, the rising demand in the industry is likely to provide long-term support to Swiggy's growth and profitability.

However, investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...