New Delhi, April 23 Swiggy Limited has received its first 'sell' rating since it was listed in November 2024, with analysts raising concerns about its falling position in both food delivery and quick commerce services.
According to a new report by Ambit Capital, Swiggy has lost the early lead it once had in these sectors and now ranks second in food delivery and third in quick commerce.
Ambit Capital began its coverage of Swiggy with a cautious view, setting a target price of Rs 310 per share. This suggests a potential drop of over 20 per cent from the company’s last traded price.
In the food delivery segment, Swiggy is now trailing behind competitor Zomato, which has a larger reach, more users, and higher order volumes, the report said.
Although the pace at which Swiggy is losing market share has slowed, Ambit expects its share to settle at around 42 per cent in the long run, it added.
Swiggy’s quick commerce service, Instamart, is also facing difficulties. Once the largest player in the segment, Instamart has now fallen behind both Blinkit and Zepto.
Ambit points out that Instamart’s addressable market is limited to just 30 to 50 cities. It also criticised Swiggy’s strategy of depending too much on advertising revenue and underestimating the competition.
The report says Instamart needs significant investment to catch up with rivals in several areas -- such as product variety, store efficiency, customer acquisition, and advertising reach.
Although JPMorgan recently noted that Swiggy is increasing its store count and is slowly catching up with Zepto, Ambit remains more cautious.
One major reason for Instamart's decline is its late response to the industry trend of 10-15 minute deliveries.
While competitors Blinkit and Zepto focused on faster delivery speeds early on, Swiggy initially stuck with a 30-minute delivery model.
It also struggled with a smaller product range and slower marketing efforts. Swiggy now faces tough competition on all fronts, the report noted.
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