Swiggy plans to bulk up cash reserves for Instamart as losses widen in Q2

Bengaluru: Swiggy Ltd has reported another unprofitable quarter this financial year, hit by rising spending on its express commerce arm Instamart, underlining the difficult road to profitability in express delivery.

Swiggy’s net loss ₹1,092 crore against ₹626 crore in the same period of the previous year. reported operating income ₹5,561 crore, up 54.4% year-on-year ₹The average estimate of analysts surveyed by Bloomberg is 5,280 crore.

The company is considering rising so far ₹10,000 crore through a qualified institutional placement (QIP) and other permissible avenues to strengthen its balance sheet and maintain flexibility in India’s highly competitive gig trading market. This comes almost a year after the rise of listed rival Eternal Ltd ₹8,500 crore through QIP and less than two weeks after Zepto raised $450 million in private equity from the California Public Employees’ Retirement System (CalPERS).

According to Swiggy, the planned fundraising is a strategic move to strengthen its balance sheet and remain agile in the face of increasing competition from well-capitalized rivals. “Our cash reserves are very strong today,” Swiggy co-founder and group CEO Sriharsha Majety said in a call with analysts. “The additional capital we plan to raise is to preserve greater flexibility, not out of necessity. We do not expect to raise further funds going forward unless we see exceptional opportunities or industry shifts that warrant this.”

“Instamart continues to scale efficiently by increasing margins even as we invest in growth. Food delivery is showing a steady recovery and we remain confident of our path to sustainable profitability in the coming quarters,” Swiggy co-founder and group CEO Sriharsha Majety said in the September quarter shareholder letter.

Swiggy’s chief financial officer Rahul Bothra said the QIP will act as a strategic reserve to support future growth. “The industry continues to attract a lot of capital from both new and established players, so this meeting with the board is aimed at raising additional capital that will serve as both growth capital and strategic reserves going forward,” he said.

Both executives underlined that Swiggy’s current cash position, including proceeds from its partial exit from Rapido, is sufficient to fund its current growth plans. They said QIP is a way to provide financial headroom and agility as competition in the flash trading segment intensifies.

The race in flash commerce is heating up, underscoring the need for top companies to keep up with the rapid expansion of dark stores and changing consumer needs. Another player in the segment, Zepto, raised nearly $450 million this month, valuing it at $7 billion, indicating its smaller rival is interested in rapidly expanding in this space. Blinkit, Eternal’s flash trading arm, saw its highest cash burn compared to previous quarters to build 272 dark stores. spent approx. ₹1,038 crore, which is 94% of the funds it allocated in the quarter to expand its dark store network.

War of the dark warehouses

Swiggy has four main business segments: food delivery, out-of-home consumption, express commerce and supply chain and distribution. between ₹5,561 crore revenue, supply chain and distribution contributed about 46% or ₹2,560 crore. The food distribution business was the second highest contributor at approximately 34.5%. ₹1,923 crore. Next comes the flash trading business, which contributes 17.6%. ₹980 crore. Out-of-home consumption generated ₹88 crore, followed by platform innovations. ₹12 crore.

Food delivery, out-of-home consumption and express commerce are business-to-consumer (B2c) segments; supply chain and distribution are business-to-business (B2B) focused.

Of the three B2C businesses, the flash commerce business recorded the highest year-over-year growth. Instamart, which distributes daily needs from milk to groceries, doubled its revenue compared to the previous year. The company just added 40 new dark stores, bringing its total to 1,102 across 128 cities. This is much slower than its larger rival Eternal, which added 272 stores in the September quarter, taking its dark store count to 1,816, and aims to install 3,000 stores by March 2027.

Of course, while the number of dark stores of Bengaluru-based Swiggy is less than its Gurugram-based rival, it has the upper hand as each of its dark stores handle 800-1,000 orders per store per day due to its megapods of around 4,000 sq ft. These large-sized dark warehouses facilitate the storage of non-grocery items, which currently account for approximately 26% of gross order value (GOV). The value of all customer orders placed on Swiggy platforms before deducting discounts, commissions and other costs.

By comparison, a typical Blinkit store is around 2,000-3,000 sq ft. “Therefore, despite Instamart’s smaller store network, it offers comparable order volumes, underlining higher store productivity and capital efficiency,” said Sandeep Abhange, research analyst, consumer and mid-cap at LKP Securities.

The company’s management reiterated Instamart’s target of breakeven before June 2026, supported by operating leverage and scaling basket size.

Eternal, the parent company of Swiggy’s larger rival Blinkit, expects a 1% increase in net margin in four to six quarters from the new business model. However, analysts said: Mint In an increasingly competitive environment, this process may take two to three quarters longer. Eternal is also likely to face pressure to increase its dark store investments and ad spend; each store costs approx. ₹1 crore in fixed expenses as per the latest shareholder letter.

Food distribution ‘stable’

Swiggy’s food delivery business was the next highest revenue growth driver. This is thanks to higher platform fees and better delivery cost optimization.

The segment generated the following amount of revenue: ₹1,923 crore compared to Eternal’s food delivery business revenue ₹2,485 crore.

According to Swiggy’s shareholder letter in September, “The food delivery business performed steadily throughout the quarter, with sequential GOV growth and stable margins. Average order values ​​and order frequency remained stable, driven by resilient demand from our core urban users. However, growth in small towns continues to be gradual.”

The company has doubled down on its food delivery business by introducing niche verticals to target different audience segments and launched three new food services this year. Launched in January 2025, Snacc is Swiggy’s Gen Z-focused snack brand that sells packaged and ready-to-eat snacks through Instamart and select retail stores. It aims to tap into the rapidly growing impulsive snack market with fun branding and healthier product options.

This was followed by Desk Eats, which was launched earlier this year as part of Swiggy’s Out-of-Home Consumption business, which offers pre-planned, affordable lunch boxes for office workers in business hubs such as Bengaluru, Gurugram and Hyderabad. The service is designed to turn weekday lunch breaks into a regular Swiggy habit.

The third offering, Toing, available in mid-2025, caters to small gatherings and celebrations by creating ready-to-serve party platters and mini catering menus from local restaurant partners.

Income increased by 49% in out-of-home consumption ₹88 crore in the September quarter. This segment still lags behind Eternal’s walk-out platform called District. ₹Revenue of ₹ 189 crore was generated in the September quarter.

“Overall, Swiggy’s September quarter edition marks a decisive shift from growth at all costs to disciplined growth,” Abhange said. “The company’s greater focus on cost control and operating leverage positions it as one of the most productive players in India’s hyper-competitive gig trading environment.”

Shares of Swiggy closed 0.2% lower ahead of its earnings. ₹418.1 per capita on the BSE on Thursday, compared with a 0.7% decline in the benchmark Sensex.