Swiggy share price poised for 20% upside? Axis Capital initiates coverage on stock, highlights competitive position | Stock Market News

Stock Market Today: Shares of Swiggy climbed over 6 per cent on Monday, December 16 after the brokerage house Axis Capital initiated coverage on the new-age stock with a ‘Buy’ rating and a target price of ₹640, citing a 27 per cent valuation discount to peer Zomato as justified. The target price suggests a 20 per cent upside from the last close of ₹532.35. 

Analysts at Axis Capital view Swiggy as a compelling investment opportunity, leveraging its strong position as India’s second-largest player in both quick commerce (q-com) and food delivery.

“Swiggy presents a compelling investment opportunity to gain exposure to e-commerce in India, as the second-largest q-com and food delivery player. We initiate with a BUY rating and a SoTP-based target price of ₹640. This implies a March 2027 EV/sales of 5.3 times, which is at a 27 per cent discount to Zomato’s consolidated EV/sales of 7.2 times. The discount is justified, given Swiggy’s smaller scale and delayed profitability,” Axis Securities said.

Key factors driving the bullish stance include Swiggy’s ambitious growth plans, particularly in its Instamart q-com business, which is scaling effectively. This division is expected to drive gross order value (GOV) and top-line growth, supported by improving cost control and margin expansion, the brokerage said.

Stock Price Trend

The recently-listed stock rose as much as 6.5 per cent to its day’s high of ₹576.7. It has now jumped around 48 per cent from its IPO price of ₹390. It was listed on the bourses on November 13.

Currently, the stock is just 1.5 per cent away from its record high of ₹576.7, which it hit earlier this month on December 5. The scrip hasn’t traded below its issue price till now and has added 20 per cent just in December so far.

Invetsment Rationale

Growth Potential in Quick Commerce and Food Delivery

Swiggy’s key segments—food delivery and q-com—remain underpenetrated, offering significant room for growth, said the brokerage. It forecasts a 38 per cent revenue CAGR for FY24–27, with food delivery contributing 23 per cent and q-com showing explosive growth at 84 per cent during the period. It added that Swiggy Instamart’s aggressive expansion of dark stores and broader product offerings is expected to position it strongly in this market.

Moreover, Axis noted that food delivery, operating as a duopoly in India, also has room to grow. While Zomato maintains a lead, Swiggy’s higher take rates and innovations, such as the ‘Bolt’ initiative for faster delivery, add to its appeal.

Improving Profitability and Operational Efficiency

Swiggy has made strides in profitability, with Axis Capital projecting an adjusted EBITDA of ₹390 crore in FY27 compared to a loss of ₹1,840 crore in FY24. This improvement is driven by cost optimisation in both fixed and variable expenses, alongside increasing brand commissions and advertising revenues from its Instamart business.

While food delivery’s growth may be incremental due to market maturity, q-com offers substantial margin expansion potential, Swiggy’s efforts to optimise delivery costs and expand its operational footprint support its path to profitability, highlighted the brokerage.

Leadership, Innovation, and Strategic Restructuring

Swiggy’s evolution from a founder-led organisation to a professionally managed one has strengthened its business model. The onboarding of industry veterans in q-com and retail is expected to improve execution and performance, said the brokerage. 

Despite losing its leadership position to Zomato in food delivery, Swiggy’s innovative approach and resilience have allowed it to remain competitive, it added. 

“Swiggy’s ideator persona with improving execution should help it remain one of the leaders in its operating segments,” Axis Securities noted.

Swiggy vs. Zomato: Bridging the Profitability Gap

Zomato currently outperforms Swiggy across most operational metrics, including monthly transacting users (MTUs), order volumes, and restaurant partnerships. Additionally, Zomato’s Blinkit outpaces Swiggy’s Instamart due to deeper market penetration and faster dark store expansion, Axis Capital said.

“However, Swiggy has shown directional improvements in profitability, with the gap narrowing due to better cost control and strategic adjustments. While Swiggy may not match Zomato’s scale, it is well-positioned to close the profitability gap through targeted dark store expansions, delivery cost optimization, and enhanced brand negotiations,” it further added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.