IIFL Capital launched coverage on Swiggy with a ‘buy’ rating and a target price of Rs 535, a 46% upside from Wednesday’s closing price. The brokerage highlighted “improving execution, strong positioning in food delivery, and underappreciated potential in quick commerce” as key drivers of future gains.
Swiggy, which has seen its market share dip in recent quarters, is forecasted to deliver a 28% compound annual revenue growth rate between FY25 and FY28, and turn Ebitda-profitable by FY27, IIFL said.
While acknowledging Swiggy lags behind market leader Zomato (now Eternal) by 7–8 quarters in both gross order value and Ebitda margins, the brokerage said this is due to slower execution in the past rather than a competitive disadvantage.
“Swiggy’s market share shrunk from 46.5% in FY22 to 42.4% in 1QFY25. We believe this was largely on account of execution issues rather than any competitive disadvantage,” IIFL added.
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Quick commerce in focus
Swiggy has begun regaining lost ground through improved execution and initiatives such as Bolt, its 10-minute delivery service, which now contributes 12% of order volumes. The platform is estimated to hold a 43% share in India’s food delivery market, which IIFL expects to remain a stable duopoly.IIFL projects the food delivery vertical to grow at 18% CAGR over FY25–28, with Adjusted Ebitda margins expanding to 20% by FY28. Swiggy’s contribution margin has already risen from 7.1% of gross order value (GOV) in FY25 to 7.8% in the March quarter, aided by better monetisation, higher ad revenues, and cost optimisation.“We expect Ebitda margins approaching ~5% of GOV by FY28 and stabilising at those levels in the long term,” IIFL said.
Swiggy’s food delivery business has been valued at $8.5 billion by the brokerage. Given its market capitalisation of $10.3 billion, that implies the remaining value assigned to its quick commerce (QC) and other businesses is just $1.8 billion, an “88% discount to Blinkit despite being only about half its size,” IIFL noted. The brokerage said this valuation gap offers “meaningful re-rating potential” if Swiggy executes well in QC.
Technicals turn bullish
Thursday’s gain extended Swiggy’s one-month rally to 19%, with the stock up 7.5% over the past week and 7.5% in the last three months, though still down 33.7% over the past six months.
From a technical standpoint, Swiggy is trading above all its key simple moving averages (5-day, 10-day, 20-day, 30-day, 50-day, and 100-day), signalling bullish momentum. The Relative Strength Index (RSI) stands at 62.4, below the overbought threshold of 70. Meanwhile, the MACD is at 9.1 and remains above both its centre and signal lines, a positive sign for the stock.
Also read | Swiggy shares may rally 50%, says IIFL as it initiates coverage with buy call
IIFL flagged heightened competition and regulatory uncertainty as key risks to its investment thesis, but maintained a confident tone on Swiggy’s long-term potential: “The stock currently trades at 4.1x FY26 estimated EV/Sales, well below Indian internet peers,” the brokerage said, adding that it expects this discount to narrow as Swiggy scales profitably across verticals.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
