Swiggy’s growth rebounds but cash burn rises; Morgan Stanley cuts its target price by about 20%

Revenue beat expectations, so why was the target price cut?

In the second quarter of fiscal 2027 ended September 2026, Swiggy reported operating revenue of 75.71 billion Indian rupees, up 36.1% year over year and 1.8% above Morgan Stanley’s forecast. Its consolidated adjusted EBITDA loss, however, was about 7.6 billion rupees, wider than in the previous quarter and worse than the bank expected. Growth improved while losses widened.
Morgan Stanley cut its target price from 328 to 263 rupees and maintained its Equal-weight rating. The adjustment reflects both lower profit forecasts and reduced valuation multiples. The bank believes the growth gap with Eternal and execution performance remain the main obstacles to a valuation recovery.

Instamart’s net order value (NOV) was 65.94 billion rupees for the quarter, up 34.8% year over year and 12.7% quarter over quarter, but still 1.8% below Morgan Stanley’s forecast. Monthly transacting users increased by 1.3 million, while retention and purchase frequency also improved.
Growth was accompanied by targeted pricing investments: the contribution margin fell by about 80 basis points quarter over quarter, and the adjusted EBITDA loss widened to 8.95 billion rupees. Morgan Stanley left its future NOV forecasts broadly unchanged but increased its budgeted losses needed to support growth, indicating that its downward revision focused on the cost of growth.
The bank recognizes that a denser dark-store network and more stores help acquire customers, but a valuation recovery requires growth to continue after discounts normalize. Its forecast for the quick-commerce adjusted EBITDA loss in fiscal 2029 is 21.355 billion rupees, well above the market consensus of about 12.134 billion rupees.

Management believes the absolute quick-commerce loss peaked this quarter and expects double-digit sequential NOV growth and an improvement of about 100 basis points in the EBITDA margin next quarter. New store additions will prioritize utilization and productivity across the existing network.
The owned-inventory model is scheduled to launch midway through the third fiscal quarter, with the transition completed over the following two to three quarters. Management expects it to improve the contribution margin by about 80 basis points. Reaching EBITDA break-even, however, also requires NOV to rise to about 2.3 times its current level, or 600 billion rupees annualized, and a contribution profit of 30 rupees per order.

Traditional food delivery’s gross order value grew 17.7% year over year this quarter, and adjusted EBITDA was 3.41 billion rupees, with the margin rising to 3.4%, benefiting from improved monetization and delivery efficiency. Management maintained its full-year order-value growth guidance of 18%–20%, excluding Toing, its low-priced food-delivery app.
Toing now covers more than 50 cities, and two-thirds of its users are new or previously inactive Swiggy customers. However, the platform innovation business to which it belongs saw its quarterly loss widen to 1.62 billion rupees. Successful expansion depends on the profitability of retained users, customer acquisition costs and delivery costs.
Morgan Stanley also expects Toing to divert some business from traditional food delivery, making the latter grow more slowly than Eternal’s Zomato. It therefore changed its traditional food-delivery valuation multiple from parity with Zomato to a discount of about 15%.

The out-of-home consumption business’s gross order value grew 35% year over year this quarter, but adjusted EBITDA was just 80 million rupees, with a margin of 0.5%; profit was about 49% below Morgan Stanley’s forecast. The bank accordingly cut its future adjusted EBITDA forecasts for the business by about 30%–35%.
The consolidated cash balance at quarter-end was 136.6 billion rupees, down 7.05 billion rupees quarter over quarter, with cash burn of about 7.08 billion rupees during the quarter. The bank believes the current share price implies a value close to zero for quick commerce, but changing this low valuation requires sustained strong growth and an improvement in the contribution margin to occur together.