India’s food delivery space is evolving fast, and affordability is becoming the next big battleground. The brokerage house CLSA is positive on Swiggy, maintaining an ‘Outperform’ rating. It has set a target price of Rs 357. This implies a potential upside of around 24% from current levels.

According to the CLSA report, the company’s latest strategy, that is, launching a value-focused platform called Toing could help expand its user base and drive higher order volumes. However, the move also raises questions around profitability and whether it could impact its core business.

Let’s take a look at what the brokerage is betting on and what is the rationale behind it – 

CLSA on Swiggy: Toing – Swiggy’s big bet on affordability

Swiggy’s new platform Toing is designed to target price-sensitive users, a segment that has remained largely untapped in premium food delivery models.

According to the brokerage report, “Toing is a separate, value-focused food delivery app aimed at expanding category penetration among price-sensitive consumers.”

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Furthermore, CLSA, in its report, added that the platform aims to scale volumes while improving efficiency. It does this by focusing on higher order frequency and optimising deliveries.

CLSA on Swiggy: Early traction signals strong demand

According to the international brokerage house, “Toing is seeing a rapid pickup in consumer adoption, as per app usage and download data.”

The platform was first launched in Pune and quickly expanded to other markets. CLSA added in its report, “The pilot launch in Pune and the rapid expansion that followed suggest strong early traction.”

Data from app analytics firms also indicate that downloads and user activity have increased significantly over the past two months. 

How Toing works – Lower costs, higher volumes

Toing’s business model is built around affordability. According to the CLSA, “Toing relies on higher batching, order frequency and a shorter delivery radius to lower last-mile costs.”

The platform also focuses on smaller and non-branded restaurants, giving them more visibility. As per the brokerage house repot, “Toing focuses on improving visibility for smaller/non-brand restaurants.”

The brokerage noted that for larger brands, Toing does not consistently offer the cheapest options.

CLSA on Swiggy: The profitability question remains

Profitability remains a key concern. According to the brokerage report, “we are concerned about the effect on profitability of Toing and the main app due to cannibalisation of the customer base.”

In addition to this, Toing does not charge platform fees for smaller orders. This will helps attract users but on the other side, it may also limit revenue per transaction. 

CLSA on Swiggy: Ad revenue and efficiency could be key

One possible way to offset lower margins is through advertising. According to the brokerage report, increased user activity on Toing could help Swiggy generate more ad revenue, especially from smaller restaurants looking for visibility.

The brokerage also believes that improved logistics efficiency could support margins over time. If batching and delivery optimisation work as planned, the cost savings could help balance the lower pricing strategy.

CLSA on Swiggy: Different strategy from rivals

Swiggy’s approach to affordability is different from some of its competitors. While others may focus on in-house food models, Swiggy is relying on partnerships with restaurants and operational efficiency.

What investors need to know

According to CLSA, Swiggy is entering a new phase where growth will be driven by affordability and wider reach. Toing could play a key role in bringing more users onto the platform and increasing order volumes.

At the same time, the brokerage highlighted that execution will be crucial.

Disclaimer: This report discusses brokerage analysis and price targets for Swiggy; however, the views expressed are those of the brokerage firm and do not constitute personal financial advice. Investment in equities involves market risks, and readers are encouraged to consult a SEBI-registered financial advisor before making any buy, sell, or hold decisions. This information is provided for educational purposes only and is not an offer or solicitation for the purchase of securities.

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