Bernstein Begins Swiggy Coverage with 'Outperform' Rating

International brokerage firm Bernstein has recently initiated coverage of the newly-listed food delivery company, Swiggy Ltd, assigning it an "outperform" rating. The firm has set a target price of ₹625 per share, projecting a potential 25% increase from the current levels.

Bernstein highlighted Swiggy as a key player in India’s growing convenience economy, benefiting from the market's shift towards faster delivery models. The brokerage also expects the competitive duopoly between Zomato and Swiggy to remain intact and stable, noting that both companies will continue to dominate the Indian food delivery and quick-commerce segments.

Swiggy’s business model, which includes both traditional food delivery and its quick-commerce vertical, Instamart, positions the company to capitalize on the increasing demand for convenience-driven purchases. Bernstein finds Swiggy’s current valuation reasonable and foresees an opportunity for the company’s shares to be re-rated. The gross order value (GOV) for the food delivery segment is projected to grow at a rate of 21% between FY2025 and FY2027, supported by increasing urban penetration and repeat customer growth.

Bernstein is not alone in initiating coverage on Swiggy. In December 2024, JP Morgan began coverage with an "overweight" rating, setting a price target of ₹730 per share. JP Morgan analysts expressed optimism about Swiggy's potential in both the food delivery and quick-commerce segments, driven by improved execution and strategic focus. They believe that Swiggy's recent operational improvements and investments in supply-chain efficiency will strengthen its competitive edge. Analysts noted that Swiggy is likely to reach a critical operational scale across its core businesses, which could enable faster profitability growth compared to its peers over FY2025 to FY2028.

Similarly, domestic brokerage Axis Capital also initiated coverage, giving a "buy" recommendation and forecasting a 20% upside, with a target price of ₹640 per share. The brokerage cited Swiggy’s ability to leverage its growing customer base and its leadership in innovation as key drivers for long-term growth.

CLSA joined in December with a bullish "outperform" rating and set a price target of ₹708 per share. CLSA highlighted Swiggy’s substantial growth prospects due to its presence in a large total addressable market (TAM) for both food delivery and quick commerce. CLSA added that the quick-commerce segment represents a significant growth opportunity, and the brokerage expressed confidence in Swiggy's ability to improve its performance through accelerated growth and enhanced profitability.

However, CLSA acknowledged that Swiggy is still trailing behind Zomato in market share and consumer mindshare, particularly in tier-two and tier-three cities. Despite this gap, CLSA noted that Swiggy's valuations already reflect its current position in the market. The brokerage expects India’s quick-commerce market to grow sixfold between FY2024 and FY2027, with Swiggy positioned as one of the key beneficiaries of this surge in demand.

Moreover, analysts emphasized that Swiggy’s focus on improving unit economics and expanding delivery infrastructure could further enhance its financial health. By increasing operational efficiency and maintaining competitive pricing strategies, Swiggy could drive sustainable profitability, despite the high costs typically associated with quick-commerce operations.

Market experts have also highlighted the role of partnerships, loyalty programs, and technological innovations in Swiggy's growth strategy. Swiggy’s integration of artificial intelligence and predictive algorithms to streamline delivery processes has been well-received and could provide the company with a further competitive advantage.

In the face of intensifying competition, Swiggy’s ability to balance aggressive growth with profitability will be a key factor to watch. Industry insiders believe that Swiggy’s success in achieving profitability across both its food delivery and quick-commerce businesses could set a precedent for other players in the space, reshaping India’s convenience economy over the next several years.