Ladies and gentlemen, good evening, and welcome to the Swiggy Limited Q4 and FY 2026 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Sharma from the investor relations team. Thank you, and over to you, sir.
Thank you, operator. Hello, everyone, and welcome to the Q4 and FY 2026 earnings conference call for Swiggy Limited. Our financial results and shareholders letters have been published on the exchanges and the information pack has been placed in the investor relations section of our website, www.swiggy.com. We would like to inform you that the management may make certain comments on this call that one could deem forward-looking statements. Specifically, the financial guidance and pro forma information that we will provide on this call are management estimates based on certain assumptions and have not been subjected to any audit, review or examination procedures. Swiggy does not guarantee these statements and is not obliged to update them at any time. Joining us on the call today are Sriharsha Majety, MD and Group CEO, Mr. Rahul Bothra, our CFO, Rohit Kapoor, CEO of Food Marketplace, and Amitesh Jha, CEO of Instamart.
With this brief preamble, let us start the Q&A. Operator, you can please go ahead.
Thank you very much. We'll now begin with the question and answer session. The first question is from the line of Sachin from Bank of America. Please go ahead.
Hi, thank you for the opportunity. I have three questions. First question is about some of the comments you guys mentioned in the shareholder letter about doubling down on differentiation. Can you help us understand three to four areas of differentiation for you guys versus competition?
Hi. Sorry. Okay. Hi, Harsha here.
Hi. Go ahead.
Talk about three, four examples of how differentiation can look like in the category. Thanks for the question. Even in the shareholder letter we talked about one example, which is Noice, the private label brand. Look at categories that Noice operates in, like bread or eggs, et cetera. I can just take the three, four examples with what we've done with Noice only. If you go in the case of eggs, you will find high protein eggs that are coming with much better quality feed for the animals that just makes a better egg, that is an upgraded version. If you think about bread, lot more freshly baked bread with much lesser preservatives that just significantly enhances the clean quotient of the product and the taste of the product as well.
These are maybe some examples in the food category, but even outside that, I think there are some explorations that we've done, you know, in the cookware category with tri-ply, where we worked on expanding the category very differentially through some interventions we made, both in assortment and price to grow the category. You will actually in the next couple of months see a host of such examples pop up across the Instamart app. The broad theme is Indians are largely always looking for upgrades. That is the theme of the economy, and we believe that there is an opportunity in being the platform that can democratize that aspiration and offer more and more access to consumers across a host of categories. Noice is one route to maybe give access to great quality bread or great quality eggs to our consumers.
Working with a brand to open up something in the tri-ply category, it's an attempt to upgrade in the home cooking category by creating a better version. That is the broad theme for us.
Got it, Harsha. Just from what I understand, the area of differentiation is product categories or SKUs which have been put on the platform versus anything on speed and others. Out there, possible to throw some numbers, how much of a total GOV or NOV right now are these SKUs? You know, where do we expect that proportion to be as a percentage of NOV in terms of differentiated offerings?
Unfortunately, at this point we'll be unable to share a lot of details. As we mentioned, it's still early, but we will come back over the next couple of quarters as we have more to show on this. One specific detail that I want to add, if it wasn't clear, is this is not a strategy that is exclusionary. Even as we mentioned in our shareholder report, we will continue to serve all core related needs of our today's users, but actually amplify the upgrades part as opposed to saying we'll only do the upgrades. Thank you.
Got it. Directionally, I understand you can't give exact numbers, but when we directionally think about it, is it going to be 10%, 20% of NOV or is it going to be much, much higher?
Sachin, Rahul here. I think it would be extremely hard for us considering that we are, you know, trying to create a differentiation here. I think ultimately the consumer proposition is very strong. At least early signs that we have seen in some of the labels that we have launched.
As well as working with some brand partners. We are seeing very good uptake. I think over time, what really helps propositions like this is consumer retention and frequency increase over time, and that's where the largest benefit of these propositions will come through. As Harsha mentioned, in a couple of quarters, we will give you some more color in terms of how this is progressing for us. Early signs are very, very encouraging.
Thank you. Sachin, I request you to come back for a follow-up question.
Yes.
Thank you. The next question is from the line of Vijit Jain from Citi. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Couple of questions from my side. First with this private label and with Noice that you spoke about, is that, you know, contribution margin positive for you in Quick Commerce, private label as a whole or, you know, specific brands within that? That's first question. I'll just follow up with one more. Thank you.
Hi. On the first question, Harsha here. For us, as we've talked about Noice, is for us an attempt to actually build on the differentiated assortment and a tool for us to improve stickiness and repeats and engagement on the platform. It's not a margin-maximizing equation. Having said that, it is contribution margin positive.
Yeah. As you see, it's not in the value play, right, Vijit. What we are not trying to do is think of this as another commoditized play where you make additional couple of percentage points margins. This is a differentiated offering. This could be of even higher value and, you know, therefore more contribution margin. Across categories that we build this out, we will definitely want to accrete our overall margin structure versus, you know, doing just a commoditized play.
Understood. My next question is, you know, can you elaborate a little bit more on this commentary where you say that you've repurposed customer incentives away from direct wallet subsidies? If you can elaborate on that. Also, you know, I see that, you know, marketing spends below contribution line have started to tickle down this quarter. I know 1Q is seasonally strong. Typically you see higher MTU additions in 1Q. How should one think about both, you know, how you're tracking so far in 1Q on MTU additions in Quick Commerce, and the marketing trends below CM, if you can explain that commentary on repurposed customer incentives. Thank you.
Yes, as we had said, Hi, it's Amitesh here.
Yes.
As we had said in our last earning call as well, you know, there are multiple ways in which we will be reaching our CM number. One is the repurpose of the incentives that we give to the end consumer on the wallet. We rationalize it, we don't reduce it. In the way that it happens is that it allows for, you know, better retention for the end consumer as well. You know, that's the process that we have taken. It also means that a lot of time what will happen is a high frequency, you know, customer will retain better, and which is the, you know, process that we have essentially taken. The second question was on the marketing spends.
Marketing spends below CM and the MTU additions, how you're tracking in 1 Q?
See, there are two ways. The marketing spends, what we are doing is commensurate to the growth that we are essentially looking for. The way we looked at our MTU is that there is a lot of consumer base that we have that we need to focus more on retention and repeat on the platform, and which is what we have been trying to do over the last couple of quarters and which we will continue to do, you know, over the next couple of quarters as well. That said, there is, you know, definite marketing spend that will keep on going on the new consumer base. That new consumer base will essentially keep on increasing.
Yes, at the same time our MTU will still face slight headwind on the base that are low AOV, low frequency, and which will essentially continue.
I see. Sorry, just to 1Q does that mean, you know, MTU additions might slow? Is that what you said? Sorry, I didn't quite follow that part. If you can clarify.
No, we can't, you know, necessarily give an idea on, what will be the forward-looking, you know, assumption on this, on this number. As a, as a strategy, it has not changed in the way that we are looking.
Understood. One last question from my side. You have a medium-term guide here now of INR 1 trillion in Quick Commerce, and I think you've said something to the effect of that you'll get to INR 500 billion odd, you know, double the current pace without adding too many stores. In general, you know, the INR 500 billion to INR 1 trillion journey, how will that come about? Is that geographic expansion on the cards beyond FY 2027? Is that how one should read those comments in conjunction?
Hi, Vijit. Rahul here. I think what we are really drawing out the medium-term guidance here is in terms of the size of the business that we have built and where we see this going, right? Even if you take conservative you know, CAGR estimates of say 35%-50% in this business, we can potentially get to the INR 1 lakh crore in between 3.5 to five years, right? Depending on how the overall market growth really plays out. For us, this is, you know, really establishing the size of the prize that we are going after and also establishing the overall contribution margin pool and the EBITDA margin pool that we can clearly see from the business that we have built.
Along with the you know, reiteration of our guidance of having achieved contribution margin, you know, break or, you know, our guidance of achieving break-even in the current quarter, we would have moved it massively by close to 5.5 percentage points over the last year itself, right? Perhaps we are the only one in the industry.
Who have moved it in such a short time. For us, these are the choices, which are ahead of us. Of course, growth is important, and we don't see the necessity to add stores necessarily over at least the next few quarters considering the current utilization that we have. Outside of this geographical expansion as well as store expansion will absolutely be critical for us to get to those run rates.
Hi, Harsha here. Just to build on this answer a little bit more, we've also given this ambition for what we want in the medium term to also help explain any decisions that we will be making, because this is the framework that we've used in the past. It was important for us to get to this CM zero milestone in a quick enough timeframe for us to be able to feel the chances of the ambition becoming stronger. Every decision that we take financially, investment-wise, is all going to be judged by does it get us closer to this ambition or further from this ambition?
Understood. Thank you so much. Best of luck to you guys. Thank you.
Thank you. Next question is from the line of Jignanshu Gor from Bernstein. Please go ahead.
Hello. Hi. Sorry. My question is on Food Delivery, my first question. We've had a phenomenal growth in Food Delivery. One just clarification, all our new experiments on Food Delivery, whether it is Toing or 99 and et cetera, they are all included in the financials for Food Delivery, and both growth as well as margins. Is that fair?
This is Rohit here. Everything that you read about, which is Bolt, 99 Store, EatRight, those are all included in our core Food Delivery platform financials. Toing is a completely different business, right? It is at a very different stage of testing and evolution. That is not in the Food Delivery. That comes under the HT Innovations bucket, as you see.
Okay. Fair. All right. Going ahead, how do we think of the interplay between Toing and Food Delivery? Right. We've discussed why we needed different apps. I think that's fair. But even on Food Delivery, we have 99 Store and other parts which are creating a different brand identity or addressing a different customer profile, right? How do we think of that? Are we seeing shift of consumers from Swiggy to Toing?
Let me, please bear with me. This is going to be a slightly long answer. The food delivery is a 10-year-old phenomenon, right? We know the business, we know the category. It caters to X% of India's population, which is roughly like 10% of India's total population on a ever transacted basis. The contours of that are more predictable. We have continued to guide two things there. One is a medium-term growth of 18%-20% and a EBITDA margin of steady-state 5%. The question is, there is a large part of India which has never tasted food delivery or does it very infrequently. The question is, what is the right model for us? Toing is a separate app, a separate business at this point in time, catering to openings of that segment, right?
Now, early days, pre-PMF clearly, we are seeing some green shoots of optimism there, but it's too early to say that this is a definite model. Any such model also evolves as we go along. I know food delivery is seen as a unidimensional characteristic, but if you think of other industries, even e-commerce and Quick Commerce exists, there's some overlap of customers, but they're legit two separate businesses in their own rights. We don't know how it shapes up, honestly. We may be in a better position to give that answer in a couple of quarters down the line.
Okay, sure. That's helpful. Last, one small question on Quick Commerce. I think we added half a million MTUs despite not adding stores. What would your sort of, view be on what drove this per store MTU addition?
We don't look at MTU as a per growth, per store number. MTU is an overall number that signifies, you know, how many new customers we are essentially getting and how many customers of those are essentially retaining with us. It will be wrong to look at it as a MTU per store number. You should look at it an absolute and a percentage on the overall base.
If I might just double click on this, and I think this is an important, you know, topic that, what is your aspirational store growth, et cetera. If you look at the current coverage that we have across the 130 cities that we are operating, and, you know, in terms of the last mile, you know, that we operate and the speed that we operate, we find ourself well distributed in these geographies, right? We are catering to greater than 90% of the demand. Store addition from here is for more densification or a choice that we make when we have to do any geographical expansion. For now, you know, we want to get the operating leverage from, you know, additional utilization that will come through with the growth that we are experiencing.
Sure. That's very helpful. Thank you. I'll come back in the queue for more questions.
Thank you. Next question is from the line of Aditya Soman from CLSA India. Please go ahead.
Hi, good evening, thanks for the opportunity. Just to, two questions. Firstly again on Toing. From some of the third party data, we are seeing that monthly active users are almost as much as a third of or third of the main Swiggy app. One, would that data be accurate in terms of the adoption of Toing? Second, if that's the case, would a significant chunk of the losses in platform innovation be from Toing at this point?
Rahul here. I think we don't measure really around MAU. I think for us, the monthly transacting user is really the North Star that we see. Honestly, a number of downloads or a number of app opens is just a data point. As Rohit mentioned, it's a very early days in Toing journey to be able to establish any clear metrics there. In terms of the platform innovation, you know, this was a quarter that we also, you know, shut down SNACC operations. The large part of the, you know, cost that you're seeing in that P&L is related to the SNACC operations getting closed.
No, very clear. Thanks, Rahul. A second question on the Quick Commerce side. Right now we are seeing a slowdown in sort of overall growth, and I see that you've made the choice between sort of growth and profitability. In terms of going forward in a view, let's say if you achieve the sort of contribution breakeven, how do you see the path to accelerating growth? Would that mean that you'd have to be more aggressive on pricing again? Do you think the pricing right now in the market is just at an irrational level?
Hi, Amitesh here. See, one thing that we have reiterated again and again, is that we are not going to take the route of buying growth. It is something that we had, you know, really committed to, on that essentially a couple of quarter back, and we'll essentially continue to do that as well. The reason why we go to CM breakeven is that obviously it makes the P&L healthy, it increases our staying power and allows us to invest in the places where it is where it is much more, you know, say structural. At any point of time, our the focus that we have is on to create more such kind of, you know, differentiation and bring opportunities associated with it, essentially as well.
The growth that we will see, the one thing that will happen after we reach a CM breakeven is that any kind of headwind that we had created because we had to reach this CM positive growth will essentially go away and that will unlock some more aspects of growth which we continue to foresee happening from the next quarter onwards.
Understand. Maybe just to follow up on that. I mean, if so, would that then again mean that the losses could go up or that would be like the base level of CM that you'd operate with?
Uh-
I mean, the question in other words being that is it, Are you making a proof of concept that you can reach CM breakeven or is this a sustainable level of CM and then growth will come in with improving CM from there?
See, the one thing that we have committed is that, and which we said also, is that CM is also a reflection of our staying power in this particular business. The investment that will go, and if it is required to go on any area, that in fact enhances that staying power. The commitment that we had essentially as a given is that, if there are avenues of growth that require investment, we will keep on doing that. Any avenue of growth that dilutes CM without having any advantage on, the business that we are building, we will not do it. Buying growth, we will essentially not do, which will basically mean that, yes, we don't see a CM dilution happening going forward.
Thanks, Amitesh. That's very clear. Thanks so much.
Thank you. Next question is from the line of Ankur Rudra from JP Morgan. Please go ahead.
Thank you. You know, nice to see the acceleration on food. I want to start there. You know, thanks for the comments on Toing. I want to understand in the medium term, are you not potentially cannibalizing the main opportunity for the Swiggy, the parent food app? So far it doesn't seem like you're adding new menus and new restaurants, you're just potentially reducing your fees, delivering fees or platform fees there.
Hi, Ankur. Harsha here. As Rohit and Rahul have already mentioned, it's still too early to figure out what is going to happen, when will it happen, et cetera. I do think that it's also important because this, we're not the only players. There are folks who are also attempting what this business model can unlock as challenges outside the category. I think just by being able to do it early, we also probably have an opportunity of understanding what goes on. I think it's too early to comment on what happens in the medium term. Of course, the idea is that we progress and pull forward only if it feels like something that unlocks incremental growth.
I think just to add one thing to what Harsha said is if you look at Toing and what the proposition is, it is intended to open up a set of users who are best case infrequent on the food delivery system as it exists today, right? Hopefully along with cannibalization, if this plays out, should also see a very new set of users adopt food delivery because of the proposition being different.
I mean, I understand it's very early, but you're not seeing any signs of downgrading from Swiggy to Toing so far? Okay. Moving to the Quick Commerce side. I wanted to double-click on the medium-term targets a bit. You know, you've talked about five times growth, you know, we, and 5% kind of margin. This probably implies 50%-70% or if you look at this on a three to four-year basis, is that, number One, fair to expect? Two, what needs to happen to industry structure for this to be possible?
Yeah. Hi, Ankur . As you rightly, you know, said, we are talking on the medium term here. If you think of medium term between, say, three to six years, depending on how the category growth, you know, pans out, how the penetration pans out, how much of, say, new users and new frequencies does the category get to, the number of players that are, you know, participating. I think a lot of this is therefore not something which is clearly or, you know, which we can project from the data available today. However, the journey is very clear, right? That we have achieved a certain scale and a certain, say, profitability in this business, and any growth from here on is going to be good growth, right?
It's going to add to the contribution goal and to the profitability journey. Very hard to therefore put a timeline to it, but as I said, anywhere between 35%-50% can get you to that same place in between three and a half to five years.
Got it. Thank you for the timeline. If I could add one quick follow-up to this. In the, you know, more near term, given competitive activity continues to go on, are you happy to give up market share persistently in the search of profitability?
Hi. Harsha here. I don't think we've said anything about being comfortable giving up market share. I think we have to keep making choices between growth and profitability to get closer to the aspiration that we've talked about. If fighting for short-term relevance and going after spending in places that will hurt us later, I think that'll compromise our long-term relevance. Honestly, it is a balanced act, but I don't think there is any commitment to go and lose market share. I think it's important to build a more durable business. As we've mentioned, even more growth will come from executing on the clarity on positioning that we've been talking about. There was a question even on market structure. Honestly, we do not know yet how many players will be on the other side of all of this spending and overall category growth.
If anything we've learned from multiple categories like modern trade or telecom, et cetera, I think whoever got clarity earlier is the one that is still standing today. We just want to be clear about what our price is and keep making sure that the strategy speaks to that medium-term price. Sometimes it may have to be these pay-two calls, but as mentioned fully and, as Amitesh has also talked about, hopefully with the contribution behind us and some parts of the proposition coming together, we want to get back on the growth engine and start making investment calls accordingly.
Thank you for the clarity. That is all.
Thank you. Next question is from the line of Sachin from Bank of America. Please go ahead.
Hi. Thank you for the opportunity. I had a couple of follow-up questions which are remaining, so just, you know, following up on that. Number one, Rahul, you did mention about focusing and targeting good growth. One of your peer is talking about more like a 60% in a week CAGR for three years. Harsha did mention in the last question answer, you know, it's also about maintaining market share and not giving market share. Is that fair to assume that kind of a growth we could also expect from Swiggy while the focus towards profitability sort of, you know, continues?
Sorry to interrupt you. We're not able to hear you. May I ask you to repeat your answer once again?
Yeah. Rohit here. I think there is a thing about short-term market share and long-term market share. Even if you look at the category around today, Sachin, there's a player who's probably at 4% or 5% of contribution. We have our own guidance of getting closer to zero, as we've talked about. There are a bunch of players in the -10, -15. Maybe only talking about market share in the next quarter probably takes away from what's going to play out over the next few years. We don't have like some stated desire to lose market share. We believe that our chances to improve long-term market share come from purposefully balancing this path between growth and profitability.
Of course, crossing a big, side of the fence with the CM zero allows us to see growth as profitability, and we hope that that coupled with the proposition, coupled with everything we've learned over the last two, three quarters, gives us a fighting edge again as we invest for profitable growth.
Got it. Lastly, you know, I mean, there has been a good amount of, again, expansion which is done by some of your other peers also. When you think about expanding into, let's say, eventually Tier 2, Tier 3 cities, what are your thoughts on those lines?
Yeah. See the reason that we'll expand to Tier 2, Tier 3 cities is, one, as we said that if there is a need for essentially densification because we are simply getting that many orders, we will actually do that. The second will be that, yes, there are something that we do even right now, even in the last two quarters as well. We look at cities that are more likely to make an impact on based on the kind of consumer base that we essentially have. That level of expansion will essentially happen. Those will be smaller based on the number that we have. The third level expansion that we see is expanding in existing cities where we would have left out some of these the other areas.
The way to think about it is in the current network that we have, there is a headroom for orders which is good enough to sustain us for the next few quarter. Expansion will be more a need because we are already crossing those limits in only certain geographies, and which is the way that we'll move forward as well.
Got it. Thank you.
Thank you. Next question is from the line of Gaurav Malhotra from Axis Capital. Please go ahead.
Yeah, hi. Thanks for the opportunity. Just a couple of questions. You know, on this, in the shareholder letter, and I think so this question was raised earlier as well. You have mentioned that, you know, as you sort of will achieve contribution margin breakeven, right? You will possibly look to, you know, accelerate growth. Does that mean that, essentially, you know, the contribution margin breakeven becomes like the floor and anything extra you sort of gain from there will be then reinvested back into the business, at least in the medium term? Is my understanding correct?
You see, even the last time when we were speaking about where we will invest and where we will not, we have always maintained that in the area that we believe investment is right, we will keep on investing. In the area where we believe that it is buying growth, we will essentially not be doing it. Medium term, we will keep it, you know, very, very calibrated. Things that are essentially working out, we will essentially go behind it as well. Yes, if things are working out, there is not a need for us to necessarily reinvest contribution margin gains, you know, going forward. If we believe that there are areas where it will make sense to invest, we will essentially keep on doing that.
It's hard for me to give a guidance, but the floor information remains true. That means that, yes, if there are areas where the growth is happening without specific investment needed, we will be on that path and we will also increase our contribution margin.
Understood. Just one follow-up. While we understand that, you know, it's pretty competitive and you don't want to chase or buy growth. You know, given that there are multiple players, some of them are larger, who are quite aggressive. There are some newer guys who are becoming more aggressive. In that regard, if you were to sort of cede some market share and for hypothetically, if this competitive intensity sort of remains say for another three, six, nine months, isn't there a risk that some of your users who are sort of maybe experimenting there to other platforms will basically then permanently shift and hence to regain them will become more expensive later on?
Ultimately, as we've talked about, I think the biggest thing for us to be solved is the proposition, and that is the only structural way to keep users engaged and sticky. We will have to go out now and again, there are, as you mentioned, there are multiple players in the category, and it is not clear when anyone will make a choice saying, "I'm not going to play this anymore." We want to start building already with the clarity that some of them may also just be forever value-focused players. To play that game that we don't have any right to win does not strike us as rude.
If we were indeed like a value-focused platform, then we would say, "Okay, let's embrace this and go and try to win in this specific part of the market." If that is not our stated strategy, then I don't think we can go and win that match. For us, we are very certain that working on our proposition is the only durable answer for the long-term growth.
Just a quick question. There was an improvement in NOV to GOV in Quick Commerce this quarter. How much was this related to you sort of reducing your discounting and how much was it just some mix because of seasonality?
Yeah. One of the, you know, factors was that we stopped the NOV experiment sometime around the third week of January. That gain came through. Roughly, you know, half of the gains came through because we stopped the NOV experiment. The other one is more structural, where we've been able to, you know, offer lesser incentives to our customers and still, you know, on a sequential, you know, basis grow faster.
Understood. Thank you.
Thank you. Next question is from the line of Abhisek Banerjee from ICICI Securities. Please go ahead.
Yeah. Thank you for the opportunity. Couple of quick questions from me. First one is, we had, you know, we had a guidance that we will break even at the EBITDA level in four quarters from contribution breakeven. Does that still hold? One more thing is, in this quarter, you have spoken about, you know, the contribution margin for the month of March. Now, when we say contribution breakeven, we do mean for the full quarter, right?
On the first question, Abhisek, I think, we have, you know, carefully decided not to, you know, speculate on when EBITDA profitability will come through. As we have rightly said that having achieved the scale that we have, it's also good to harness, you know, a larger share of the growth that is going to come through. Again, what is the right kind of growth, right? That's where we will continue to invest in. I think EBITDA, you know, profitability will be a choice that will be made at a later point in time. Again, depending on how the market forces play out. On the second question, yes, you're right, this is for the entire quarter and not just on an exit basis.
Okay. I'm just trying to understand one thing. Given you will be contribution breakeven.
Beyond that, at the, you know, the non-direct expenses, things like, you know, new user acquisition costs, et cetera. How should one model that in going forward, especially given we have not really seen an MTU acceleration to the level that, you know, one would have kind of hoped for, the elevated levels of customer acquisition spends?
Yeah. I mean, I'm slightly not sure where the question was, so I'll try to answer in the best way that I understood. The new user acquisition is something that we will continue to do. It's a part of our growth engine, and obviously one of the more important aspect that we look at, and something that you will see coming from us going forward as well, is the retention of that particular user base as well. Yes, the MTU growth, a big chunk of that will come from the new users that we acquire and we retain. As I had said, there is a chunk of users that also go out of the platform. Part of that is because of competitive intensities.
Those users typically have lower frequency and lower AOV as well. It is something that we are also comfortable with because we want to retain more early consumers who are more long-term on the platform as well.
Understood. That's clear. Thanks.
That was not the question?
No. I was trying to understand whether the overall, you know, customer acquisition spends will remain at this level also. I kind of understand that, you know, the MTU numbers that you are talking about is not the gross addition, it's rather the net MTU addition. And probably churn rates are slightly higher. If you can guide on the overall, you know, expenses also, that will be helpful.
We won't be able to guide on the gross versus net. I mean, the number that we have is net of both acquisition as well as retention. The commitment that we have is that, yes, it's a growth industry, we will continue to invest on acquiring new consumer base. We will continue to make sure that the efficiency of this acquisition is also better. The more and more our proposition lands, we believe those acquisition numbers will go up. We are already seeing that happen even right now. You would see that in the kind of investments we are making and the growth that we are seeing.
We believe that that's the fixed trajectory of higher or acquisition growing at the level that we want, with a spend that is more efficient will continue to happen.
Okay, thanks.
Thank you. Next question is from the line of Vivek Maheshwari from Jefferies India. Please go ahead.
Hi, good evening. A few questions. First, on the Food Delivery side, you know, this recent increase in commercial gas prices, do you think there could be some impact on volumes in the near term because of this issue for aggregators?
Yeah. Look, I think the LPG crisis started sometime in first week of March, right? There was an impact on the restaurant industry as it reported in the media in terms of availability of, you know, cylinder, et cetera. Two things. One, we've seen a slight bit of price increase because of that which the restaurant industry has taken. We can see that on our platform, which is not significant and is less than 0.5%. That was that. Did probably offset some bit of the cost pressure.
From our standpoint, I think we were able to navigate this to support the restaurants in terms of increased analytics, increased ability for them to just spread out the demand and also I think we are supply configurations, the consumers were able to access localized restaurants, right? If both in terms of the growth as well as the profitability side, we are able to navigate this in the month of March. Since then, the situation has continued to ease out as two things have happened. Probably the supply has become better and, B, the restaurant industry is also like all Indian entrepreneurs do quite quickly pivoted to finding alternatives, whether it's electrification, whether it is alternate sources of supply, as well as just the supply situation stabilizing itself somewhat.
Okay. Got it. Thank you for that. Moving to Quick Commerce. One thing, Rahul, that you mentioned about NOV, GOV, bit, you know, and what has contributed to that increase in NOV. You know, when I look at your take rate as a percentage of NOV, that number is flat on a quarter-on-quarter basis. Why would that be the case? And sorry if it's a naive question.
No, There's a 50 basis points pick up, if you look at our take rate, Vivek.
No, that's on GOV, but when I look at it on NOV basis, that number is flat. It's at I think 19.2%.
Right. As I said, see, there's obviously, you know, things that we do on the consumer side and then things that we do on the merchant side, which, you know, is a combination of the take rate. A large part of this increase is, you know, has been on the consumer side, because we have as platform given lesser incentives. We have also started to monetize on the delivery fee side. These are the things that have, you know, impacted the AOV, GOV. It's, it's a structural move for us, because, as we have said, we are not participating some of the lower, you know, AOV orders and the consumers who are, you know, generally attach themselves to, lower basket sizes.
That's the choice that we have made. As we have also written, we have halved the mix of these low AOV orders over the last one year, which has also helped in the overall, you know, ratio increase.
I see. Got it. Lastly, you know, while, you know, we have discussed quite a bit on the contribution margin, but when we look at overheads in, you know, QC business, those are running at about INR 710 crore, INR 715 crore at least for the last two quarters. From here to, let's say, a journey to breakeven, whenever that happens, what will be the driver for this? It should ideally be a mix of like, you know, higher take rate, operating leverage, and maybe if there is some inefficiency with line item or anything that you can do, you know, can optimize on. This INR 700+ crore number is still very, very high, right? That will still translate into INR 2,800 crore of full year EBITDA loss.
How do you think about the journey to breakeven in the next few years or whenever?
Yeah. Vivek, see, while we have absolute number is, you know, at around the INR 700 crores report, you know, a large part of this is marketing spending. As you're aware, today we are seeing heightened levels of spending across, you know, various platforms, which has meant that there is certain amount of inflation on the customer acquisition cost. Now, we do expect, and we have seen this even in the Food Delivery business, when the market structure matures, we see significant operating leverage coming out of some of these spending rails. As platforms, we actually, you know, have reduced our absolute spending while continuing to, you know, get, you know, user penetration.
It's going to be a combination of scale as well as, you know, efficiencies getting unlocked on the marketing, you know, spending side.
You know, Rahul, that's what, you know, in the context of the two new competitors who have or the horizontals who have come into the space, this, you know, the marketing spends we could be here for longer period, right? Is that a fair understanding? Which means that this overhead line may take quite some time before starting to drift down.
It's going to be extremely hard to guesstimate on that, you know, where does the market structure, you know, evolve, how much, you know, competitive does it get before it settles down. I think, we have the levers to continue to extract efficiencies on the other lines and not just the marketing line. You will see, you know, continuous operating leverage now that, you know, any growth is going to, you know, deliver contribution, you know, dollars to the PNL.
Understood, Rahul. Thank you, and wishing you and your team all the best.
Thank you. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my question. My first question is on understanding the trends around the retention ratio in the Quick Commerce business for your MTUs. At the peak, we were adding 3 million consumers a quarter. Right now, we are adding 0.5 million. Our marketing spend largely would have remained intact. It appears that the growth sides would have remained largely same and the retention ratio would have come down for existing users. Is there any metric to get a comfort on how the retention ratio has changed in the last couple of quarters? Any repeat business percentage now versus about a year back?
Hi. One of the things that we have decided to do is really churn out some of these low AOV customers who have alternative platform choices today, which are getting, you know, from whom they're getting serviced. There's an active churn that we are, you know, seeing in that segment of the users. At the same time, the cohorts that we care about, which are the high spenders, higher frequency ones, those continuously, you know, are seeing in-kind uptick. Periodically, we will share. I think couple of quarters back, we had shared the AOV retention for these acquired users and, you know, we will share that periodically going forward.
A large part of that, you know, user growth, you know, reduction that you're seeing is the users that we have deliberately churned out from the platform.
Okay, fair enough. My second question is on the NOV growth. If you look at this year was very heavy lifting was done from the AOVs with all the initiatives that you took place. Maybe now and therefore next year growth would be driven more from an order growth perspective, right? The current competitive market whatever we are seeing in the order growth in the last two quarters, as an example on a [inaudible] would kind of be a right reflection of the growth in the coming quarter as well, right?
Is it fair to say that, from a next year growth perspective, keeping where our CM targets are in mind, the order growth will be a right reflection, AOVs have largely normalized and, you know, the current level of growth that we are seeing is a right reflection of the growth?
Hi, Harsha here. I wouldn't read too much into AOPD growth in the last year and therefore extrapolating it into the next year. As we've talked about in the letter as well, this year is an unusual one. There are six players, seven players on the anvil, and we've faced the most in contribution over the last four, five quarters. The overall climb from here is going to be a different climb from what we have gone through in the last four quarters. I mean, there are so many things that are changing that I don't think there's much value to be gotten by looking at what happened in the last three, four quarters because the context is very different.
Okay. I was just trying to figure out for next year, but I understand that you will not give a forward-looking statement. I was just trying to understand the mix or the qualitative aspects of it. Fair enough.
The steady-state margin that you talked about in commerce on a medium-term basis. You also shared very interesting data on the utilization of the stores at 40% kind of number. What's the right utilization rate required for you to get to that hit the steady-state margin?
No, it's a function of, you know, the maturity of the stores, right? For example, whenever a store hits close to 80% to 85% capacity, we, you know, end up densifying that particular area, and we open another store there. Depending on when we achieve those scales and what is the utilization of those respective stores, I think the store additions will continue basis that, you know, utilization which typically, you know, happens at around 80% to 90%.
Okay. Thank you. All the best.
Thank you. Next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. The first question is, we talked about breakeven next quarter, which is a swing of almost 180 basis points in terms of your CM. That's higher than what we've done over the last eight quarters. What are the big drivers for a massive swing? Would it be discount reduction? Are there other factors which are at play?
As we have called out in the letter, one, while 180 basis points was the average for the quarter, we exited the month of March with 110 basis points. This was, as we had mentioned, there were certain experiments that we were running on the monetization side that, we have reversed and therefore on an exit basis we got a better pickup. The journey itself is, more like 100 basis points versus 180 basis points. Now that IFL is behind us, we are pretty confident of being able to achieve that and therefore
Sure.
Yeah. Just to complete I think there is monetization, there's advertising, there's operating leverage. You've seen sequential volume growth, you know, continuing to pick up. These are the levers that are available away.
Rahul, we saw at an entity level, advertising promotions fall by almost 8% sequentially. Now our, say, fixed costs in the QC business have not fallen. Is it some other business where there has been rationalization or is it something else?
No, I think we don't share specifically this number across the business units, but as I directionally mentioned to you, there are categories that are at a mature stage require, you know, which give us more operating leverage and lesser CAC on that spending key.
The last question is in terms of CapEx. We didn't see much of a dark store addition or our area of the dark store has also not gone up materially, but the CapEx is at around INR 195 crore, more or less similar over the last two quarters. What are the areas where this CapEx is going?
Largely on the warehousing investment. As we have, you know, overall, increased, you know, the geographical footprint. There are these Tier 2 markets where we see the need to open warehousing, which helps us in also reducing our middle mile, as well as, you know, will servicing serviceability to those cities. Most of these investments have been made in the warehousing, you know, part of the business, which again gives us structural capability to continue, you know, growing for the future. That's, you know, a lot of that expansionary phase is now behind us. As we've also mentioned that we expect the CapEx numbers to significantly come down from the last couple years onwards.
Okay. Okay. Just one small question if I can squeeze in. What is our non-grocery share in the QC side? I think we used to disclose that earlier.
Yeah. We will continue to periodically disclose that. We hit the early 30s and, as you have, you know, seen about that we expect this number to be somewhere in the range of 30%-40%, because beyond that we still want to retain the benefits of have, you know, being on a high frequency, you know, grocery platform. Those are the numbers in about 30%.
Oh, okay. fair enough. Thanks a lot, and all the best.
Thank you. Next question is from the line of Prateek Maheshwari from HSBC Securities. Please go ahead.
Hi. Thank you for the opportunity. My question was more on the Quick Commerce midterm guidance. As you said, the guidance is for INR 100,000 crore in NOV in probably three to six years. I was just looking at I actually wanted to understand the drivers in terms of the NOV user data on frequency, right? Frequency for sure has fallen for you guys to 2.8 times versus what you guys were doing. Probably it was 30% higher. But let's say if I even think about 3.5, 3.6 times, the number of users that you would need at the current state of NOV would be somewhere between 45 million-50 million. Right?
If we look at the largest player in the market, in a way, if you convert their guidance, their guidance is also to reach in similar size of the user base, right? Two questions here. One is, this is what you want to imply for the positioning, relative to the player. Also, this would based on the user additions of half a million or a million, right? This would take really long time. Right? Considering even if the industry consolidates from seven to three players. Just wanted to understand from you on these points.
Hi. See, one of the ways to think about growth is exactly in the terms, which you spoke about how many users we add.
How many times they've really transact and, you know, what are the NOV of those users. We believe that the movement will happen obviously, you know, one part on the frequency as well. We don't believe the frequency that we are in right now is the right frequency to do essentially medium-term planning. That frequency will [inaudible] there is a movement that we expect to happen on NOV as well that will also drive some part of that particular growth. As you rightly mentioned, the majority of that number will essentially come from the acquired customers that we are getting. We spoke about this number, and I think one of the other callers spoke about the net versus gross.
The headwind that we have on our MTU growth now is right now specifically related to removal of the consumer base that transacts very infrequently with our platform. You will see that movement happen in when that particular consumer base will be low enough, where our acquisition will allow for overall, you know, number to be essentially driven up as well. We believe that churn will be another two quarters, and after that you will see a healthy movement on our MTU numbers.
Thanks [inaudible] I have a follow up on this. Still it seems the acceleration required is quite steep, right? And you said that probably you guys after the breakeven target you'll try to do activities around it, right? Just wanted to understand, did the guidance tie, you know, guys into anything of such sort, right? Because it seems that organically you should still be trying for a very strong-- because this, the target is very high, right? 45 million users. Just want to understand that. Second thing, just wanted to understand since you guys have given the dark store, top decile dark stores in every geography is really 3%-5% of contribution margins. We could have reached about breakeven EBITDA margins at 4% contribution.
Are you guys profitable on those dark stores and even in your top city? Those two questions if you can expand on.
No, absolutely right. Our top city, for example, is op-already operating at 3%, you know, positive CM and, you know, at the city level is already, you know, breaking even at a EBITDA level. On your question on the MTU, I think, as I had, you know, called out, this is a net addition that you have seen, which has been also driven partly by some of the, you know, changes that we have done to our proposition around these low AOV users. I think, we will continue to, you know, be relevant and as we've discussed, right, the differentiation that we are creating on the platform will attract a certain set of users and user growth.
It is important, I think, both frequency, AOV as well as the MTU is going to be an important, you know, criteria in our overall growth journey. Very hard to, you know, give you specific numbers right now. Directionally, we do want to continue to acquire a lot more users than the current run rate.
Okay. Thank you so much for the answers.
Thank you. Ladies and gentlemen, we'll take the last question from the line of Aditya Suresh from Macquarie Group. Please go ahead.
Yeah, thank you for the opportunity. Just one question. If I look at your cash flow statement, despite the improvement in margin and Food Delivery, reduction loss in Quick Commerce, the absolute kind of negative number in cash from operations remains elevated. Free cash to analyze is about, say, negative $400 million. I just wanted your thoughts on that scale of loss. Thank you.
There are a couple of things. One is on CapEx. We have already said that we have seen heightened levels of investment over the, you know, last four to eight quarters, which will start to moderate as we are behind on the overall, say, warehousing, you know, investments that we have done. Some of the working capital changes are cyclical, and you should expect us to, you know, sequentially improve that in the coming year.
Thank you.
Thank you very much. Ladies and gentlemen, we'll take that as the last question. On behalf of Swiggy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.