Down 35% in 2025 YTD, Jefferies initiates coverage on Swiggy with 'Hold' rating, sees 13% upside

Global brokerage firm Jefferies has initiated coverage on Swiggy, assigning a 'hold' rating with a price target of ₹400. The call comes despite the stock's nearly 35 percent decline in 2025 year-to-date, as Jefferies highlighted concerns over Swiggy’s smaller scale and the intensifying competition in the quick commerce space. The target price implies an upside of over 13 percent from the stock’s previous closing price.

Swiggy’s Growth Prospects in Food Delivery

Swiggy currently holds a 45 percent share in India’s online food delivery market, with Jefferies forecasting mid-to-high teens growth in the segment over the medium term. The brokerage estimates that Swiggy’s Gross Merchandise Value (GMV) for food delivery will reach $3.4 billion in FY25, while the broader industry is expected to grow at a 20 percent compound annual growth rate (CAGR) through FY27.

However, Jefferies assigned lower valuation multiples to Swiggy compared to its key competitor Zomato due to its relatively smaller scale. "Stabilization in competition within the quick commerce segment and stronger-than-expected growth in core businesses are potential upside risks, whereas heightened competitive pressures remain a key downside risk," noted Jefferies.

Competitive Challenges in Quick Commerce

Swiggy’s Instamart currently ranks as the third-largest player in the quick commerce sector, trailing behind Blinkit (owned by Zomato) and Zepto. Jefferies expects Instamart’s Gross Order Value (GOV) to grow at an impressive 75 percent CAGR. However, profitability concerns persist, particularly with the entry of new players such as Flipkart and Amazon, which are expanding their presence in the segment.

Despite these challenges, Swiggy is expected to maintain a net cash position in the medium term. However, the company is projected to remain loss-making in the near term, with negative free cash flow and EBITDA through FY27.

Stock Performance and Financial Struggles

Swiggy’s much-anticipated IPO last year saw the stock list at ₹412 per share. While the stock initially surged to an all-time high of ₹617 on December 23, 2024, it has since tumbled nearly 43 percent.

The company’s financials remain under pressure, with net losses widening to ₹800 crore in Q3FY25 from ₹524 crore a year earlier. Rising competitive intensity and the aggressive expansion of dark stores have continued to weigh on margins, a trend that Jefferies believes will persist in the near term.

Potential Catalysts and Risks

Jefferies highlighted potential catalysts that could improve Swiggy’s stock performance, including market share gains in both food delivery and quick commerce, as well as stronger-than-expected trends in average order value and unit economics. However, downside risks include heightened competition, slower market growth, and regulatory hurdles that could impact business operations.

While Swiggy remains a significant player in the Indian food delivery and quick commerce landscape, its path to profitability and ability to withstand increasing competition will be key factors influencing its future performance.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.