Swiggy shares fell 4.8% to ₹176.60 on Friday as analysts questioned the strategy behind its budget-focused app, Toing. Investors are concerned that the platform may shift existing customers from Swiggy's main app rather than adding new growth, potentially increasing cash burn. Market observers are now tracking whether the segment can achieve profitability without impacting the company's core financial performance.
Swiggy shares declined by 4.8% on Friday to settle at ₹176.60, as investors reacted to growing analyst skepticism regarding the company's budget-focused platform, Toing. While the app was introduced to attract price-sensitive customers, market observers are questioning whether it creates genuine growth or simply shifts existing customers from Swiggy’s main app to the cheaper one. This practice, known as cannibalization, is a key concern for investors who worry that the company is spending resources on a platform that does not significantly increase its total user base.
Financial analysts, including those from JM Financial, have expressed doubts about keeping Toing as a separate entity. The core of the issue is that Toing relies on the same delivery and restaurant networks as Swiggy’s primary application, meaning it does not offer a truly new service but rather duplicates existing infrastructure. This overlap raises questions about the efficiency of the spending, especially as the company’s Platform Innovations segment—where Toing is housed—reported an adjusted loss of ₹162 crore in the September quarter.
The pressure is further highlighted by the performance gap between Swiggy and its primary competitor, Zomato. Recent data shows that Swiggy’s food-delivery gross order value grew by 17.7% to reach ₹10,054 crore. In contrast, Zomato reported a faster growth rate of 21.5%, with its net order value rising to ₹11,445 crore. This difference in growth rates puts pressure on Swiggy management to prove that its experimental projects can contribute to the bottom line rather than draining cash.
Swiggy management maintains that the strategy is working, reporting that two-thirds of Toing’s users are either new to the platform or had stopped using Swiggy previously. The company also claims that repeat users in cities where the app launched early are showing positive unit economics, meaning the money earned from these orders covers the cost of delivery.
For investors, the key monitorable will be whether Toing can sustain these positive economics as it scales. While analysts at Nomura have maintained a buy rating on the stock, they have adjusted their target price to ₹300, signaling that the market is watching the balance between growth experiments and the need for strict financial discipline. Moving forward, the focus will remain on whether Toing can truly expand the market or if it will continue to face operational and profitability hurdles.