Swiggy’s decision to re-evaluate its 12% stake in Rapido, citing a potential conflict of interest in the future after the ride hailing platform’s move to foray into food delivery, has been widely welcomed by analysts as a prudent strategic reset. The consensus view is that the move will allow the food delivery major to sharpen focus on its core operations amid intensifying market pressures.
Analysts are viewing the divestment move as a perfect case of corporate agility as the company is seen to be promptly addressing the competitive overlaps while capitalising on a profitable exit.
As is known, ride hailing platform, Rapido, has broadened its offerings to food delivery via a new platform called ‘Ownly’. This has raised red flags for Swiggy, which acknowledged the conflict in a letter to shareholders on Thursday.
Analysts back move
The sale, analysts say, is not only financially sound but also strategically necessary. “It removes ambiguity in governance, protects business intelligence, and reinforces Swiggy’s commitment to consolidating leadership in its primary verticals,” said a senior analyst at a Mumbai-based brokerage.
The development comes as Swiggy reported a widened net loss of Rs 1,197 crore for the first quarter, even as revenue surged 54% year-on-year to Rs 4,961 crore. Quick commerce, spearheaded by its Instamart business, contributed significantly to topline growth but also dragged down profitability, with a loss of Rs 896 crore in the segment. Food delivery, in contrast, remained in the black but saw margin pressure.
Swiggy’s adjusted operating margin for consumer businesses dipped to 4.7% in Q1, from 5.2% in the previous quarter. Within that, food delivery posted a 2.4% adjusted operating margin, down 50 basis points, while Instamart’s negative margin narrowed to -15.8% from -18%. Rival Zomato, by comparison, reported stronger metrics, with food delivery margins at 4.2% and its quick commerce vertical Blinkit operating at a more contained -1.4%.
Brokerages optimistic despite losses
Despite the drag on profitability, brokerages remain optimistic. Jefferies upgraded Swiggy to “buy” from “hold” and raised its target price by 25% to Rs 500, citing improving traction across core verticals and signs that quick commerce losses may have peaked. The firm believes measured expansion of dark stores and easing competition could help stem further downside. Swiggy’s shares, however, closed 3% lower at Rs 392.25 on Friday.
Citi Research, in its note, also struck a balanced tone, stating that while Instamart might cede some market share in the near term, Swiggy’s scale gives it a credible shot at breaking even on contribution margin between Q3FY26 and Q1FY27. The Q1 contribution margin for Instamart improved 100 basis points sequentially to -4.6%.