While downgrading Swiggy to Reduce from Add, the brokerage has also slashed its March 2027 target price by 27% to Rs 270, effectively valuing the quick commerce, supply-chain and platform innovation verticals at zero and arguing that only a sale to a larger player can unlock value for shareholders.
“Under these circumstances, the best possible outcome for investors in our view is to hope that a larger player acquires Swiggy,” the brokerage writes in a rating downgrade note.
The downgrade comes despite robust trends in Swiggy’s core food delivery business, which JM describes as operationally resilient and profitable on an adjusted EBITDA basis in a duopolistic market. The concern is that Instamart, Swiggy’s quick commerce arm, is “mired in a growth‑versus‑profitability deadlock” as management prioritises contribution margin breakeven over market share, even as traditional e‑commerce incumbents aggressively ramp up their own quick commerce offerings.
Why JM wants a larger acquirer
JM Financial contends that Swiggy’s current capital allocation and strategic choices around Instamart have left limited room for a self‑driven turnaround, making M&A the only meaningful “optionality” for value realisation. “Given no clear visibility of a credible turnaround, we argue Instamart with its current strategy will only destruct value for Swiggy shareholders, even if its food delivery segment surprises positively,” the report says.
The brokerage notes that Swiggy raised Rs 10,000 crore via a QIP in December 2025 and sold its stake in Rapido, but management has still chosen to rein in Instamart investments to chase contribution margin guidance of breakeven by Q1 FY27, rather than defend market share. This is happening at a time when “competitive dynamics have only stiffened due to aggressive expansion being undertaken by traditional e‑commerce players,” JM points out, citing media reports on incumbent platforms doubling down on quick commerce.“In this context, M&A with a larger player remains the only residual optionality for value realisation, in our opinion,” the brokerage emphasises, flagging that Swiggy’s consolidated adjusted EBITDA is likely to remain in the red at least till FY29 even as food delivery profits continue to grow.
Instamart in ‘structural deadlock’?
JM’s core worry sits squarely with Instamart, which it describes as being stuck in a “structural deadlock” that could push the business towards “strategic irrelevance” if the current approach persists. Management is targeting contribution margin breakeven by Q1 FY27 but has stopped giving a timeline for adjusted EBITDA breakeven after Q2 FY25, and the brokerage says it sees “no visibility of the path to EBITDA breakeven.”
“Instamart’s current trajectory reflects a structural deadlock,” the report states. “This approach is steadily eroding its market share as traditional e‑commerce players are expanding fast and may soon dethrone Instamart. In our view, continuation of this strategy risks pushing Instamart towards strategic irrelevance, where it may neither achieve scale nor deliver profitability in the foreseeable future.”
Despite the sharpened focus on contribution margin, JM expects only limited near‑term gains. For Q4 FY26, it forecasts Instamart’s NOV growth slowing sharply to about 61% year‑on‑year, with EBITDA losses barely improving to around Rs 8.5 billion from Rs 9 billion in Q3. By FY28, Instamart is still projected to post an adjusted EBITDA loss of Rs 29.5 billion, with EBITDA margin at around minus 5.5% of GOV, underlining the long runway of cash burn.
Valuing Instamart, supply chain and cash at zero
Reflecting this pessimism, JM has stripped out Instamart, supply chain and platform innovations entirely from its sum‑of‑the‑parts valuation of Swiggy, assigning all three a zero multiple. “We ascribe zero value to the Instamart and supply chain segments given the lack of visibility on a turnaround and the increasing probability of prolonged value destruction,” the brokerage says.
Even Swiggy’s sizeable cash pile is not given credit in the target price. JM values cash at zero in the SOTP, arguing that “with no foreseeable signs of a meaningful turnaround in Instamart, supply chain and platform innovations segments, cash on balance becomes irrelevant as it will only continue to deplete.” As a result, the entire target market capitalisation of Rs 753 billion, translating into a fair value of Rs 270 per share, is effectively driven by the food delivery and out‑of‑home segments.
Food delivery is valued at 38 times FY28 adjusted EBITDA of Rs 19 billion, down from 45 times earlier, to reflect “rising competitive intensity,” while out‑of‑home consumption is valued at 25 times adjusted FY28 EBITDA, in line with the multiple JM uses for peer “Eternal’s” dining‑out business. The reduced multiple for food delivery and zero valuation for Instamart together explain the sharp cut in target price from Rs 370 to Rs 270.
Swiggy’s food delivery operations remain a relative bright spot for JM Financial. The brokerage notes “stable demand trends” and expanding margins in a duopolistic market “wherein both players seem content on maintaining their current share.” For Q4 FY26, it expects food delivery GOV to grow about 20% year‑on‑year, with adjusted EBITDA margin improving to 3.3% of GOV from 3% in Q3.
Given the structural issues around Instamart, the emerging threat from traditional e‑commerce and new food delivery entrants, and Swiggy’s prolonged loss trajectory, JM advises investors to stay away from the stock for now. “Till any telltale signs” of a potential acquisition by a larger player emerge, “we recommend investors avoid the stock,” the note concludes.