Shares of Indian food delivery giant Swiggy Limited fell nearly 5% in Thursday's trading session, hitting a session low of Rs 211.50 per share. The decline follows a new report from foreign brokerage Citi, which highlighted concerns over increased competition from rival Eternal Ltd's renewed emphasis on its food delivery segment.
Eternal's Strategy Shifts Market Dynamics
Citi's analysis suggests that Eternal Ltd's strategic shift towards prioritizing growth over margins in its food delivery business, with a guided medium-term growth of 20% year-on-year, presents a somewhat adverse read-through for Swiggy. This aggressive stance by a key competitor is seen as a potential cloud over Swiggy's future outlook.
Swiggy's Potential Mitigations and Q3 Projections
Despite the competitive pressure, Citi noted that continued margin expansion within Swiggy's core food delivery operations and potential growth contributions from its Toing initiative could help cushion the impact. The brokerage anticipates Swiggy's core food delivery margins to expand in the September quarter, with Toing's performance being a crucial factor to watch when the company reports its quarterly results later today.
In the quick commerce sector, Citi projects Swiggy's net order value (NOV) to increase by approximately 15% quarter-on-quarter for the September quarter. This growth, however, trails Eternal's projected 22% expansion in the same period. Looking ahead, Citi does see scope for Swiggy's growth to accelerate in the December quarter.
Widening Losses in Quick Commerce
The report also forecasts a widening of Swiggy's adjusted Ebitda loss in its quick commerce segment, expecting it to reach Rs 870 crore, up from Rs 780 crore in the June quarter. Overall, the company's adjusted Ebitda loss is projected to increase to Rs 710 crore from Rs 650 crore in the preceding quarter, according to Bloomberg.
Analysts Vijit Jain and Sanchit Chandna described the development as a "bit adverse" read-through for Swiggy, as reported by Bloomberg, emphasizing the implications of Eternal's renewed focus on growth.
Investors will be closely watching Swiggy's official quarterly results for further clarity on its performance and strategic response to the evolving competitive landscape.