Whalesbook
### Nuvama's Enduring Optimism for Swiggy
Brokerage house Nuvama has reaffirmed its 'Buy' recommendation for Swiggy, projecting a target price of Rs 490. This forecast suggests an approximate 49% potential upside from the current market valuation, which hovered around Rs 328. This sustained optimism comes despite a crowded online food technology sector in India and persistent losses in certain business segments. Nuvama's analysis points to the fundamental strength of Swiggy's core food delivery operations as the primary driver of this positive outlook.
### Q3 FY26 Performance: Mixed Signals
Swiggy's financial results for the third quarter of fiscal year 2026 (Q3 FY26) revealed a performance that slightly surpassed Nuvama's expectations on key metrics. Revenue for the quarter reached Rs 6,150 crore. The company managed to narrow its earnings before interest, tax, depreciation, and amortisation (EBITDA) loss to Rs 780 crore, which was lower than anticipated by Nuvama. Profit after tax (PAT), adjusted for minor impacts, stood largely in line with estimates. However, other reports indicate Swiggy's consolidated net loss widened to Rs 1,065 crore in Q3 FY26, a 33% increase year-on-year, driven partly by increased operational and expansion costs. Despite revenue growth of nearly 54% year-on-year to Rs 6,148 crore, profitability remains a focus for investors.
### Food Delivery: The Stable Backbone
The food delivery business continues to be Swiggy's most robust segment, demonstrating accelerating growth and steady improvements in profitability. Gross Order Value (GOV) in food delivery reached Rs 8,960 crore, fueled by an expanding base of 1.81 crore monthly transacting users. Operational profitability in this division was bolstered by increased advertising income and enhanced fleet utilization, leading to expanded contribution margins. Analysts note that food delivery growth continues to accelerate while profitability exhibits consistent improvement.
### Instamart Faces Competitive Headwinds
Swiggy's quick commerce arm, Instamart, presented a pressure point during the quarter. While year-on-year growth remained strong, sequential momentum moderated as the company strategically reduced low-value orders and focused on increasing average order value (AOV). This shift is a response to intense competition and a conscious strategy recalibration. Although losses persist in the quick commerce segment, margins showed marginal improvement, with adjusted EBITDA margins moving from -12.1% to -11.4% of gross order value. Reports suggest that quick commerce business order growth was impacted by GST-related price cuts, a shifted festive season, and a strategic decision to avoid irrational competition, leading to Nuvama tweaking earnings estimates downwards for FY26 and FY27.
### Valuation and Future Outlook
Nuvama has adjusted its earnings estimates downwards for FY26 and FY27 due to higher-than-expected losses in certain segments. However, the brokerage has rolled forward its valuation base to FY28 estimates, maintaining its positive 'Buy' stance and target price of Rs 490. The valuation methodology values Swiggy's food delivery business at 35 times adjusted EBITDA, while Instamart is valued at 0.7 times net operating value. In terms of overall valuation, Swiggy is valued at an estimated Rs 89,821 crore, with an EV/Sales ratio of 4.61x. The Indian food service market is projected to exceed $125 billion by 2030, with the organized sector expected to drive significant growth. Competitors like Zomato (Eternal) have shown strong performance, with Q3 FY26 net profit up 73% YoY to Rs 102 crore and revenue up 202% YoY to Rs 16,315 crore, and its Blinkit unit achieving EBITDA breakeven. The intense competitive environment in quick commerce, however, remains a key factor influencing industry-wide profitability and Swiggy's growth trajectory.