Swiggy , a leading food delivery and quick commerce platform in India, reported strong performance in its quick commerce business, Instamart, for the first quarter. The company held its earnings conference call on July 31, revealing significant growth and improvements across key metrics.

Instamart's Stellar Performance

Instamart, Swiggy's quick commerce arm, demonstrated remarkable growth with a 108% year-on-year increase in Gross Order Value (GOV). This surge was primarily attributed to the expansion of dark stores in both existing and new areas. The business now operates in 127 cities with a total store area of 4.30 million square feet.

Impressive AOV Growth

One of the standout achievements for Instamart was the significant improvement in Average Order Value (AOV). The company reported a 16% quarter-on-quarter and 26% year-on-year increase in AOV, surpassing its own guidance. This growth was driven by focused efforts, including the Maxxsaver program, which has achieved a 28% Monthly Transacting User (MTU) penetration.

Contribution Margin Improvement

Despite headwinds from network expansion, Instamart's contribution margin improved by 100 basis points quarter-on-quarter. The company added 41 new stores during the quarter and expects to reach contribution margin neutrality between December and June.

Food Delivery Business Maintains Momentum

Swiggy's core food delivery business maintained competitive performance with an 18.80% GOV growth. The company's Bolt service, which focuses on faster deliveries, now contributes over 10% of food delivery orders.

Strategic Initiatives and Future Outlook

Amitesh Jha, CEO of Instamart, highlighted the success of the Maxxsaver program in driving AOV growth and improving customer retention. He stated, "We believe that this is the right way to approach both basket building for the end consumer, making sure that they get great offers as well as making sure that they come back to our platform again and again."

The company remains committed to investing in growth amid continued competitive intensity in the quick commerce market. Sriharsha Majety, Managing Director and Group CEO, emphasized the company's focus on innovation, particularly in the 10-minute delivery space, stating, "We are taking a measured approach, having a certain narrow presence to understand with the critical mass of consumers, how to bring more consumer love into the offering, and how the economics work."

Swiggy's management expressed confidence in their strategy and growth trajectory, maintaining their guidance for reaching contribution margin neutrality in Instamart within the projected timeframe.

As the quick commerce and food delivery landscapes continue to evolve, Swiggy appears well-positioned to capitalize on market opportunities while focusing on profitability and customer experience improvements.

Swiggy , a major player in India's food delivery market, has set in motion plans to divest its approximately 12% stake in ride-hailing startup Rapido. The move could potentially net Swiggy up to ₹2,500 crore, highlighting significant value creation in a relatively short span.

Rapido's Soaring Valuation

The proposed deal values Rapido at an impressive $2.7-3 billion, marking a substantial leap from its $1.1 billion valuation just last year. This valuation surge underscores the rapid growth and increasing investor interest in India's mobility sector.

Swiggy's Financial Pressures

The stake sale comes at a time when Swiggy is grappling with mounting financial pressures. The company has reported:

• Net losses of ₹2,278.00 crore in the past two quarters
• Cumulative losses exceeding ₹6,600.00 crore over nine quarters

Despite these challenges, Swiggy maintains a robust cash reserve of ₹5,354.00 crore as of the June quarter.

Investment Returns and Strategic Considerations

Swiggy's initial investment in Rapido dates back to 2022 when it injected $120 million during a funding round that valued Rapido at $827 million. If the sale materializes as planned, it would represent a 2.5X return on Swiggy's three-year investment, showcasing the company's astute investment strategy.

The food delivery giant cited a potential conflict of interest as a key driver for the divestment, noting Rapido's plans to enter the food delivery business. This move highlights the dynamic and competitive nature of India's tech-enabled service sector.

Rapido's Growth Trajectory

Rapido has demonstrated impressive growth, with its business expanding by approximately 120%. The company's annualized gross merchandise value has reached around $2.2 billion, indicating strong market traction and customer adoption.

Transaction Timeline

The stake sale is expected to conclude within a three-month timeframe, potentially reshaping the competitive landscape in India's food delivery and mobility sectors.

Implications for the Food Delivery Market

This development could have significant implications for the food delivery market in India, where Zomato Ltd is a key player. The potential entry of Rapido into food delivery, coupled with Swiggy's strategic divestment, may intensify competition in an already fiercely contested space.

As the transaction unfolds, market observers will be keenly watching its impact on the broader ecosystem of food delivery and mobility services in India. The move underscores the fluid nature of strategic alliances and investments in the rapidly evolving tech startup landscape of the country.