Ladies and gentlemen, good day, and welcome to Swiggy Limited Q2 FY 2027 earnings conference call. 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 the conference, please signal an operator by pressing star and 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 Q2 FY 2027 earnings conference call for Swiggy. Our financial results and shareholders' letter 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 the 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 subject 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, Rahul Bothra, our CFO, Rohit Kapoor, CEO of Food Marketplace, and Nandita Sinha, CEO of Instamart.
With this brief preamble, let us start the Q&A. Operator, you can please go ahead.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register, you may press star and then one. Your first question comes from the line of Gaurav Malhotra with Axis Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just had a couple of questions on food and quick commerce. Firstly, on food, if you can give us some sense on what you are seeing in terms of emerging competition from Rapido. We see Flipkart, I mean, it is also doing something in food. How are you seeing the landscape?
Hi, Gaurav. Harsha here. I will take that first question. Actually, as of now, only Rapido is live to the general public, and Flipkart has not opened to the public at scale even in Bangalore yet. We are, of course, closely watching the market. We happen to be participating in the value market through our pilots with Toing, and we have talked about it extensively in our shareholders letter as well, I think, over the last four, five quarters. We are closely monitoring the business health, the PMF, and we are quite excited by what we are seeing as of now. Competition has begun, but I think we are able to respond very strongly, both from the Swiggy asset platform as well as the Toing asset. Is there any specific follow-up you would have?
Yeah.
Sorry, go ahead, please.
Our sense, however, as of now, and it is the reason why we are investing in Toing also right now, is that we do believe that the market can expand if the right proposition offering value to consumers while being sustainable can be cracked. For us, it is of specific interest also because Toing is, in some sense, for us, insurance of a large profit pool at its worst, and an addition to a large profit pool at its best. That is the reason why we continue to play for it, and we continue to monitor all the health metrics, and are continuously revising our plans and iterating on the business based on everything we know.
Got it. In the shareholders letter, even in food, you have sort of mentioned about investments towards the affordability thrust. Toing is where the affordability focus is. Is there some sort of an overlap happening between the food and Toing from an affordability focus perspective?
There is some overlap, but we've also talked about the extent of the overlap and how it's been changing with time. Every passing month as we get scale, we're seeing the overlap actually improve, as in reduce, which is what gives us confidence that it is the opening of a new market. Yeah, I mean, it is part of the puzzle. There is going to be some, but we monitor it closely, and it is in a very healthy level right now as we speak. As it scales, it's starting to get better.
Got it.
The overlap percentage is reducing, which for us increases our confidence that this is the opening of a new market.
Got it. Just one question, quick commerce. Some of the underlying metrics in quick commerce were decent, right, in terms of the MTU additions, your throughput per store, those sort of moved up. But the delta change in losses seems little bit on the higher side. If you could just help us understand. I understand in the shareholders letter you've given some sense on where the extra margin compression has come from. But if you can give us some sense on how should we think about these losses going forward. Also now that you've started to sort of refocus on growth, would that also mean that you will be getting back into focusing on the tier two markets?
Nandita here. I think, like you said, this quarter we've kind of gone back on the growth trajectory. We've had a good quarter with a 13.4% growth. I think what makes us excited about this growth is the fact that the quality of growth has been very good. We've seen our retention metrics go up by our frequency metrics go up by 4%. We've added 1.3 million MTU, like you said, and we've built this on the back of habit building, which has been on the back of cohortized user bases that on which we have done habit building. We have invested behind our differentiated assortment proposition. This makes us confident on the quality of growth that we've been having.
As a result of this, we believe that as we continue to invest, as we continue to build the quality of growth, both on the user side, which is on building our frequency habits, building our differentiated assortment, which has actually given us great results in terms of the retention that we see on the platform, and also increase the productivity that we have on the throughput of each cohort. This will actually take us towards sustainability and profitable growth. So this is our journey that we will continue to make. We are confident of the quality of growth that we've added in this quarter.
Got it. The second question in terms of the tier two markets and how you're thinking about it now.
I think we believe that we've laid out our network in terms of T1 and T2 markets. We will continue to focus on markets where we are seeing growth in the same manner of building back our habituated users and reaching out to them through both the habit building categories like fresh and staples, as well as extending our differentiated assortment category. I think this is how we will build on our one across the markets. I think the focus will continue to build user quality across the market. I think this is where we will build our business as we go forward.
Thank you.
Thank you. The next question comes from the line of Vijit Jain with Citi. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Can you hear me?
Yes.
Yeah. Hi. Thanks. In the letter you have mentioned that Toing's success can basically get the food overall marketplace growth to 25%-30% from the current range of 18%-20%. At the moment, would you be closer to the lower end of that number, 25%-odd? In general, that 7%-10% extra growth in GMV terms translates to maybe 10%-15% higher volumes. Am I roughly in the right ballpark when I look at those numbers in that lens?
I cannot answer the specifics of the second part, but for the first part of your question, we would be closer to the lower end of that range that we talked about.
Got it.
As we Sorry.
No, please go ahead.
As we mentioned in the shareholders letter as well, we are also learning and getting even more proof points about the business at this time, and that is where we are going to have investments range bound while we get even more discovery of some key questions that we have.
Got it. Sure. Harsha, just a related question to that. Is therefore Toing now at a point where shutting this down, calling it an experiment is now not likely at all? Would you be comfortable to make that assessment of Toing at this point of time? If you can talk also about the retention cohorts that you are seeing on Toing. You have mentioned retention cohorts on Instamart at 60% month one and so on. Any color you can give on how the retention cohorts of Toing are doing right now based on whatever the right benchmarks for it should be. That will be super helpful. That was my second question.
Hi Vijit. Rahul here. To answer your question around whether it is an experiment or now it is ready to be scaled, I think we have asked for maybe another quarter or two.
Right.
Enough green shoots we have seen to be able to now also call out that this investment is showing us the frequency growth that we were hoping for, the category extension in terms of new user acquisition to the platform that we were hoping for, and more importantly, some of the earlier cities turning unit economics positive for the repeat users. You can imagine that in an affordable offering where the average of basket sizes are a fraction of, say, the main platform, it is extremely hard to build a business because it requires significant density.
It requires the cost to serve to match the revenue, which is also a fraction of the main platform. Our ability to navigate many of this also comes from the fact that we are building at the back of the original chassis that we have is fully, say, expressed in the main platform.
Right.
The incremental overhead that we incur is just on user acquisition. The fixed cost is very, very low in this business. It is all discretionary. Therefore,
Right
our ability to is all dialed down is very agile in the segment. You should probably give us maybe another quarter or two before we call out whether this experiment has worked. But enough we see to be able to give you that direction, that it is the right direction.
I think, Rohit here, just to add to what Rahul said. Another notable point is that what you see with shareholders letter is a sizable number of restaurants are seeing Toing volumes contribute meaningfully to their platform, their restaurant share. It is not just on the consumer side, but also on In the cities we are present today, if you go and talk to restaurants today, they will talk about the two existing players and Toing quite regularly. It is becoming meaningful for them as well.
Yeah. Just to answer your second question on the retention metrics, one thing we can call out is that we are seeing better retention metrics than the core app.
Okay.
Not only the retention metrics are better, but the frequency of even the dual appers is 25% higher than the singular app. Yeah. As I said, the metrics look in the right direction. At the same time, we need to continue to scale the business, with the right business market or business economics is where the current focus is.
Yeah.
Sorry. Thank you so much.
Harsha here. Building on top of the Swiggy platform and the Swiggy Pyng is one of the things that we are generally very excited about. That is what he said by saying that it is discretionary and optional, and even to this quarter or in general, most of our spending is in new user acquisition and activation as opposed to any other loaded cost that a traditional new business would have to take. This and the ability to constantly be able to open up the market at a fraction of the cost that new insurgents might have is something that motivates us to continue to play and find even better answers over the next two quarters.
Great. Thank you so much, Harsha, Rahul. Super helpful answers. Thank you.
Thank you. The next question comes from the line of Sachin Salgaonkar with Bank of America. Please go ahead.
Hi. Thank you for the opportunity. I have three questions. First question, what steps, Harsha, Rohit, you guys are taking to avoid Toing cannibalizing Swiggy? I am asking that because when we look at the growth rates of Swiggy and compare that with Zomato, one gets a sense that for last couple of quarters, they are a bit slower. Any specific thing to watch out for? I would love to understand how you are looking at it from that point of view.
Rohit here. Let me take that question in two parts. On the growth rate, if you see, Rohit called out in the letter in September, we are back on the— I am just talking about Swiggy, back to 20% plus growth. We see us maintaining the 18%-20% standalone guidance on Swiggy. On Toing, two out of three users that we are seeing are new to platform. Even on the users, as Rahul mentioned, on the users who are using both, we are seeing 25% higher orders per user. So it is doing two or three jobs for us, clearly the combined strategy. One is open up the market to a new set of consumers who are either very low frequency on food delivery or were not on food delivery.
Point number two is give more choices to consumers on what occasions, which app they want to use, and they are showing that they are rewarding that strategy with the higher orders per user frequency. Third, obviously, there is a competitive shift in landscape. This is, as Harsha said, that clearly, we see there is a robust strategy to participate in the market where there is 10 years of legacy of building the food delivery business and also new entrants entering. So it is insurance we feel, but on the upside, it has significant potential to unlock value in the future.
Got it. I am clear on that, Rohit. Second question on quick commerce. I see in shareholders letter you guys have mentioned contribution margin to remain in the range of 0 to -100 basis points with sequential improvement thereon. Is this subject to better retention and maturity of cohorts? I am asking this question because competition is still intense. So what, again, points we should look to see that you guys will go down and start improving the CM versus CM remaining at these levels only?
Yeah. I think what we had called out even in the previous quarter was that we need a bit of reset in terms of our growth, and the 0 to 100 basis points guidance that we had given was keeping that flexibility in mind. As you have seen, we have grown at a healthy pace of 13% plus in the previous quarter, and our guidance for the current quarter is also to be able to deliver a double-digit growth on a sequential basis. So we will obviously operate within those tight guidance.
It is important that the users that we have churned out, which were unprofitable, and the quality that we have hence acquired and who continue to show better behaviors, both from a retention frequency delta, is something that we want to maintain and that will ultimately give us a positive contribution margin from the existing users that we will operate with. While the competition intensity remains high, I think as a platform, we have made various steps towards getting better customer experience in the market. Therefore, we are very confident of being able to do that without worrying about the competition in the market.
Got it, Rahul. What you are saying is we should expect an improvement in the revenue as well as contribution losses or contribution margin improving going ahead?
So see, as I said, it is hard to give you a specific number, but what we have guided is for 100 basis points improvement in EBITDA in the current quarter.
Okay. That 100 basis points of EBITDA has no benefits coming from the move to inventory model, right? Because the move to inventory model happens mid of next quarter.
That is correct. So we will start the process in the mid of current quarter, and it is expected to fully transition over the next two to three quarters.
Got it. My last question is, sorry to harp on this, I had asked you guys this question in the past also. How should we think about the dark store additions and the growth? Clearly one of your peers has guided to add close to 5,000 dark stores, and you do see their growth also accelerating and outperforming the growth of the others in the industry out there. You guys have a decent amount of cash on balance sheet. So what would make you guys to change the strategy in terms of adding more dark stores and hence, in a way, benefiting from a slightly better growth out there?
I think, Sachin, at the cost of repeating, I think we do maintain the fact that store addition is going to be a factor of growth. Because we are present in the 130 plus cities that we are. We do not have a near-term expectation to increase the geographical coverage. Therefore, the store addition, which say, competition may be doing due to store city addition, is therefore not to be considered in our case. So wherever there is going to be growth, and which is maxing out on capacity, we are adding stores. So you will continue to see us expanding the number of stores even in the current quarter, as growth continues in those hyperlocal zip codes. As you can also see from the overall capacity utilization, last quarter, we increased it by close to 10% on an orders per day per store.
But it still leaves sufficient room to continue the growth journey without having to necessarily increase the pace of store expansion. From a coverage standpoint in these cities, we are well covered. So even if you look at the speed metrics, we are best in class compared to some of the competition out there. From the assortment standpoint, as a combination of our larger dark stores, which are the Megapods, as well as the hyperlocal, the normal stores, we are able to provide the assortment that is required to get us the growth that we are looking for. So we do not see the need to necessarily add a lot many more stores. As growth continues, you will see that store expansion continuing.
Thank you, and all the best.
Thank you. Your next question comes from the line of Abhisek Banerjee with ICICI Securities. Please go ahead.
Yeah. Thanks for the opportunity. Just on the store expansion bit, you just spoke about how you are adding stores wherever you are maxing out in terms of capacity. Could you give some color on what that maxing out of capacity looks like in terms of orders per dark store per day? What number do you hit, and then you have to put up a new store, and what proportion of your total stores would be at that kind of a level? If you can give some color on that.
Abhisek, we typically start the decision to open a new store in that zip code when a store crosses around 2,000 orders a day. By the time the store is up, which typically takes two to three months, those stores start doing roughly 2,300-2,500 orders per day. Every quarter, the pace of expansion, as you have seen, if you are adding 5%-7% stores, that's the number that are maxing out of capacity if the pace of growth continues at this level.
Understood. The proportion of stores where you have that 2,500 odd throughput of your overall store universe?
As I mentioned, every quarter, roughly 5%-7% of the network is close to that utilization.
Okay. This is not a cumulative number, right?
No, it changes every quarter with growth. If you are delivering the growth, say, sequentially on a double-digit side, you will see more stores getting maxed out of capacity, and therefore the store addition becomes a natural outcome.
Understood. The market leader is now talking about expansion into tier three cities. What is your experience there? Do you think that there is some more juice to get in? Because, see, one thing we are noticing is that whoever acquires a customer first seems to get the benefit of some sort of a loyalty rather than trying to acquire second, and then you are basically also searching for the highest quality user. Does it not make sense for us to explore that at this point of time?
Nandita here. I think we have growth which is largely, I would say, in the large cities. I think that is where we are focused. Like I said, I think we are building the business and the focus towards execution on building on our habituated users. We do see a large part of our growth in the large cities, therefore we will continue to focus there. Like I said, we are not looking at geographical expansion beyond where we are today, and we will continue to focus on the cities that we are present in, and we will do that via the habituation that we have built by taking users through this journey. That's where we will focus on. Our playbook for focusing on this journey remains the differentiated assortment that we are building.
One in eight orders today is of NOICE, and that gives us a much higher retention. Similarly, as we build our pod productivity, that will give us a much higher advantage in terms of how we are growing. These will continue to be our focus areas in the large cities that we are.
Understood. In terms of this quarter, there was obviously a timing difference in the festive season vis-a-vis last year, right. Would it be correct to think that, the next quarter should see a much faster kind of growth or would you not rather commit a higher number at this point of time?
Right now, we won't commit. I think we're in the beginning of the quarter, so we won't commit on this right now.
Understood. Just one last question on food delivery. You are obviously sticking to the guidance of 18%-20% YoY growth for the full year in the core business. One thing that I would like to understand is, one way of doing that could be just to keep the margin flat and reinvest into growth. Is there a margin target that you have in mind where you start doing that, or would you just rather allow it to continue the way it has been expanding?
Yeah, Abhisek, as you have seen, we have added close to INR 50 crore on an absolute EBITDA for the quarter. In a market where competition from all forms is only going higher. The 5% trajectory is a natural outcome. 5% of GOV, which is what we have stated. You should continue to see operating leverage in our business, which we continue to accrue. At the same time, you may have seen our monetization, which is at its highest ever with take rate exceeding 26%. There are sufficient levers which are available to us to be able to continue this journey towards that 5%, and that is something that we are committed to. Beyond that, I think we start making choices around reinvesting it back for growth, because I do not think the margin journey necessarily stops at 5%.
There is a continued densification that happens, cost synergies that come through, as well as operating leverage that you should expect in the business.
Got it. Just one last thing, sorry. Could you give any demographic profiles of the Swiggy core users versus the Toing users, if there is any differential that can be noted?
Look, this is Rohit here. We do not collect that much demographic data as a company, but from our consumer dipsticks and understanding, the Swiggy platform caters to a pretty much a wide demographic, starting right from the adolescent for whom the order is made by maybe the parent or the elder sibling, right up to senior citizens. I think that is true. Our sense is that for Toing, the audience is far younger, and probably 70%, 80% of the users are sub 30 years of age, and many of whom are coming into either they are in their final years of college or coming into employment, and first-time jobbers, and who will form the consuming class three to five years out in a significant way. I think that is the difference that we see.
Understood. Thank you so much.
Thank you. Your next question comes from the line of Jignanshu Gor with Bernstein. Please go ahead.
Hi. Thank you for the opportunity. I hope I am audible. I have two questions. One is for Nandita on quick commerce. So one of the things that I see which is markedly different between our performance and the performance of the other listed peers is the monetization rate. I wanted to understand, Nandita, your plan to improve this, and where do you think is the key issue, because this rate has not really moved in the last three quarters. I would sort of also expect that this is a project or effort which can run in parallel to the scale-up, while there is some dependency. Just want to understand how you are thinking about improving monetization for our quick commerce orders.
Thanks for the question. This is something that we are actually quite focused on in terms of building on two counts. I think as we look at our strategy in terms of engaging with brands on differentiated assortment, it actually allows us the opportunity to co-create with brands, and that increases our engagement with them. On the other hand, I would say that also our ability to have a better set of users and more productivity on our pods, this also puts us in the flywheel to growth, especially for users and geographies, which we can then actually build together with brands. I would say if you look at the loop that we are creating with differentiated assortment, as well as by creating a high-habit user, it allows us to actually engage better with our brands and therefore take up our monetization rates.
We've actually made some movement in this quarter. It's a 10 basis points movement that we made, and we will continue to work on this stream because this actually allows us to give a great assortment to our customers as we work together with brands. This is something we focus on.
There are two parts to this monetization, right? Or three parts, rather. There is commissions, there is ads, simplistically, and then there is income from consumers, or charges. Where do you think we have the maximum lever? In these three, and maybe the lower hanging fruit as well. It could be helpful to understand.
I think as we look at this, I spoke about how are we co-creating with our brand partners, and that actually allows us to build the base for ensuring that monetization leads this growth. Over a period of time, we will ensure that consumer fees. We will continue to evolve the consumer fees. That is going to happen. I think the two parts that I would really focus on is monetization. The second thing is really how are we evolving the consumer fee structure as we are evolving the habituated user. Those are the two pieces which allow us to ensure that as we continue to build on this.
But monetization will need it and our co-creation with brands will help us actually build a more sticky user base, which we can then build habit over a period of time, which allows mix impact to be favorable for us as users become sticky. This is where we will build this journey.
Okay, great. Thanks for that. My second and last question is on Toing, and I think either Harsha or Rohit. I want to understand what's your framework for deciding, as you said, maybe in the next few quarters, whether Toing is an experiment, whether it's supposed to be scaled, right? What are the metrics you're looking for, and what are you willing to compromise on? Is it the growth and the size of the market that you see which makes you attractive? Is it a consumer behavior? Is it the unit economics, and is there a threshold for that? Are you willing to accept dilution to the margin profile of the food delivery business when you add the two businesses together? How are you thinking about your framework for decision-making on Toing? I think that will be helpful to understand. Thanks.
Hi, Harsha here. I think it is not just one thing, it is a set of the few. We've talked about how some of the early cities are showing what they are in unit economics for repeat users. We would like to see how that sustains. As we go and expand the user footprint, how does customer acquisition cost evolve? There are also continuous learnings that we're making in terms of propositions that can bring delivery costs even lower, and those are things that some more advertisement push that will really help us get a more robust sense of the steady state economics.
Okay. Is it fair to say that we have a sort of an answer of what this can lead to, but we just need a few quarters to get there? Or is it that we are still discovering? How early are we in that journey, I think that's the only second thing which will be helpful. Yeah.
As we mentioned, I think at this stage, with the state of the business that is four quarters-ish old, we are quite happy with the progress that it has made. It is a highly, as Rahul mentioned, majority of the spend is in marketing, new user activities, which means it is discretionary. We are in a competitive market. We want to really understand more about the stuff that we are already building conviction on, I would say. Because what we know is that it can be profitable over the next one, two quarters. We will get a better sense of delivers that we originally envisaged for the steady state economics, getting more information on that. Things will be competitive, but we will still be able to get a good sense of how the model can.
I think Rohit here, adding on to what Harsha said. There is clear evidence in the food delivery industry in the past that scale turns into margins and EBITDA over a period of time, and we have demonstrated successfully, right? We see no reason why that same thing will not play out in Toing, right? Of course, there is investment needed to create a business of this size and to push the growth rates from, let us say, 18%-20%, which was envisaged earlier, to 25%-30%, what we are seeing. As we have said, even in the shareholders letter, we expect the investments to remain range-bound, and we will operate with all three guardrails in terms of building the business. One is it opening up new TAM, which it is at this point in time.
Second is the consumer showing the right amount of retention frequency, which it is at this point in time. Third is shaping the economics towards what becomes a hopefully very profitable business over a period of time. There will be a bit of a curve for sure, but I think there is nothing that we see at this point in time which discourages us from just pushing ahead on this.
That is helpful. Sure. Thank you. Thank you, Harsha and Rohit. Thanks.
Thank you. Your next question comes from the line of Gaurav Rateria with Morgan Stanley. Please go ahead.
Hi. Thanks for taking my question. My first question is on quick commerce. Coming back to the point around quality of growth. There are a lot of goodness that we drove in the business in the form of private brands, in the form of improving delivery timelines, in the form of fruits and vegetables that you talked about, retention increasing there. At the same time, I also saw the pricing intervention that we have done in the business, which implies NOV to GOV ratio coming down for the current quarter. How to segregate our pickup of growth between these two factors, one which is inherently structurally positive for us and the one which is kind of discretionary nature, which may remain or may not remain in the coming quarter?
I think like you pointed out yourself, that the quality of growth is actually looking very encouraging, and the way that we've done it is actually being very cohorted and very focused on the cohorts that we are driving growth for. We will continue to drive growth to build habit for all of the cohorts. That habit is actually a positive loop because this takes us into a higher category mix with users, and that actually helps us in profitability as we go forward. The second piece that we know that we will continue to build on is our differentiated assortment-led growth, both on nectr, as well as the other work that we're doing with brands. 20% of our orders today are on differentiated assortment. This gives us higher retention, and therefore this helps us in our profitability and our EBITDA journey.
I think lastly, as we build on this journey of ensuring that as we build habit, our pod productivity also goes up, and therefore the goodness that we have on the other underlying metrics start to show up for us. I would say that going deeper into cohorts and building habit with different categories, building on our category mix by increasing the category penetration and therefore compounding that growth, and finally compounding on the differentiated assortment, which allows us for both retention as well as growth in the future. All of this results in our pod productivity going up, which ultimately takes us down the EBITDA improvement path.
I think this is where we feel confident on the flywheel that we are building for ourselves and the green shoots that is coming in terms of both the adoption of differentiated assortment, NOICE and nectr, as well as the retention that we are seeing.
Just a follow-up on this. Should we think about these pricing interventions as one of the levers for driving this habit formation, which effectively will improve retention of the cohorts over time?
That's how we are viewing it. We are going after very focused cohorts, and that's what is helping us improve the frequency. We are going after frequency use cases, fresh staples. This is where we are going after to ensure that we continue to build frequency and retention of these cohorts.
Got it. My second question is on food delivery. Your competition talked about capping the margins at a certain level and driving incremental investment back in the business to accelerate the growth. Do you think that strategy could have a rub-off effect on us in our margin improvement journey, and our margin improvement should be largely now a function of the operating leverage on the overhead costs and less on the contribution margin in future?
Hi. I do not think so. As I mentioned previous, our trajectory of that 5% growth continues, and you have seen some progress already made of 30 basis points in the previous quarter, and that will be sequentially achieved. So we do not see that we will need to take any pricing actions or reduce our margin structures here because as we have already pointed out, the affordability play for us is the Toing vehicle, and there again, we have our job cutting in terms of being able to get more from category users and grow the overall market to the 25%-30% CAGR growth for us overall. So in the core business, both the top-line growth of the 18%-20%, as well as the steady-state margin of 5% stays protected without us having to go through any dilutive route in the near term.
Got it. Last question on Toing. So very clearly articulated on the metrics that you are looking at to decide on the scalability of the business, but is it also going to be a function of the external factors? Let us say if the competition decides to completely scale down this and not pursue this, it will probably not have any impact on our strategy because this is more of a time creation that we are doing rather than any reaction to competition in any case.
As I mentioned even earlier, I think there are two sides of the coin. As a bare minimum, it is insurance in a market that can expand, but at its best, it is a market that can really grow and be a sustainable one. So every day we show up, we are actually driving the category forward on how it can grow and be sustainable. If we find out that that can not be done and competition is not interested, sure, it can continue running without investments. But when we wake up, we are hungry figuring out how to make this model succeed, how do we think about making it sustainable.
Got it. Thank you. All the very best.
Thank you. We will take last two questions. Our next question comes from the line of Kunal Vora with BNP Paribas. Please go ahead.
Yeah, thanks. First one again on Toing. It looks like it is making annualized loss of about INR 4 billion on a revenue of INR 5 billion. How should we think about that trajectory? Have the losses peaked, and at what level of revenue can something like this break even?
I think we have already talked about the investment being range bound in the short term, and that also will offer us the opportunity to look into how the platform is working, how leverage comes with the investments that we are making, and the quality of the PMF. In the short term, as we have mentioned, we will continue to iterate the investment, continue to be range bound, but we do expect growth.
Losses could remain at this level and revenues will continue to scale up. That is the template which you are-
That's the template. That is also one of the things that we want to demonstrate for ourselves and
Right. Understood. Second one, how should we think about the NOV per store per day in the coming quarter? There is a 50% gap between Blinkit and Instamart, which is persistent. What can be done to address this? Megapod strategy is something which could help, but it has not really narrowed the gap. What else can be done?
We do believe that we are looking at our. We have a double-digit guidance for growth. If we are looking at how we are looking at the growth, I think, again, as we look at productivity, we will continue to. Parts of it will come from our category mix, part of it will come from our store productivity going up. Leverage will kick in and we are not looking at changing any configuration on how we have opened our stores, et cetera.
We are looking at increasing the productivity of the store. This allows us actually to give a higher category mix to customers, as well as it has a double benefit of giving a better category mix to customers, as well as actually ensuring that we are more productive on these stores. That's where we will focus. We are not looking at changing anything around our network there.
It's a pure math question, right? Because last quarter we grew 300% and our store network grew 6%. That necessarily adds to the NOV per dark store. We want to maintain a similar trajectory. As I said, we are not working backwards from a store count addition because it's not going to weigh just new distribution. The efficiency metrics on this will continue to be seen in our performance.
Okay. Just one last one. In the shareholders letter, you mentioned that competitive intensity in the sector remains high and you do not expect it to ease in the near term. My observation is that the competition has eased slightly. Minimum order values have moved up, discounting levels seem to have reduced. Do you agree with this or I am missing something?
There is high competition in the sector. This is also this quarter of the festive season. I think there will have more players that are coming in. There is festive season that is playing out, and I think it is important to actually look at this as an expanding market and focus on our own strategy. I think we are very focused on ensuring that we build the habit loop with the users and the productivity loop with the pods, and continue to build our differentiation.
This actually puts us in good stead versus competition because we can see actually our users retain better on all of these metrics. I think that is where we see this as a growing market. There will be competition that is going to play, and there is a festive quarter which has intense competition, but we will be focused on our own strategy.
My question was
Hi
has the competition eased at all? I mean, through the last six to nine months or nothing has changed?
As your question is has competition eased, I think that as we are seeing, there is some part of some months which are there where we could see some competition easing off. I do think that it is very early to call this in, which is whether it has eased out or not. I think there are new players who have come in. Therefore, we will have to continue to, like I said, focus on our strategy because I think that volatility around how competition will react will continue to be there. There may be some addition and some calibration on some ends, but overall there will be competition.
Building on what Nandita said, Harsha here. She's talked about, we've talked about, I think the next milestone for us is to get to that profitability at an EBITDA level and demonstrate that.
Even in a competitive market, it is competitive, we want to focus on the strategy that we've picked up. Pick up the basic serve consumers every day in an even better way, get the right kind of consumers, and differentiate to be able to get closer and closer to that. That is our guiding light as we make decisions every passing quarter. Are we making the business stronger and closer to the ambition by actually building resilience for the business? Resilience in the business will have to come from doing some things greatly and some things differently, again, in a market of seven players. I know there are various versions saying, "Should you do NOICE? Should you do something?" I think that if everyone's going to do exactly the same things because they're good ideas, that's also not the sure shot path to EBITDA zero.
When you find success in a few shoots, which are harder to replicate for other competitors, I do think it's responsible for us to double down and find even more differentiation because that is the road to resilience in users sticking for longer, no matter what the incentives are outside, and that is what will help us get closer to managing the growth and EBITDA profile of the business over the next few years.
Understood. Thank you.
Thank you. The next question comes from the line of Aditya Soman with CLSA. Please go ahead.
Hi. A more fundamental question, Harsha. If I take a step back, compare this other listed entity valued at more than five times what Swiggy is. For a business that is largely similar, the gap in every metric I see is actually widening quite considerably. Even at a store level, if I look at something like Instamart, even at a store level, orders per store for Blinkit grew 7% and yet profitability has improved. This is despite them adding new cities which could be less profitable or whatever, even without going there. I think, obviously, the market is attributing a different expectation of execution from Eternal and from Swiggy. One can say that you just look at your own path and not look at theirs, which is fair.
From a Swiggy perspective, for this market perception of a gap in execution to change, one needs to see this gap narrow. With you sitting on cash, why not look at expanding new cities, given that two of the other players are already at 100 stores or around this number of stores, there’s another player that's catching up on the number of stores. Would it not mean that if you all focus on the same cities and start a different strategy again on assortment, but we are talking only about one in eight orders having these SKUs. Even that, I'm assuming two to three items per order, one and somewhere around 16 to 24 being NOICE. How would that change the story long term?
Yeah. Thanks for asking that, Aditya. Firstly, I think our competitors, Blinkit enjoys a pretty strong flywheel that has been compounding over the years. That is the reason why they've been able to build a more resilient business. For us, the next step is actually going to build that more resilient business before just using cash because it exists in the bank to set up new flags. As I mentioned even in the previous answer, I think our first job is to build a stable, resilient business that has clearest line of sight to EBITDA zero. The optionalities come after that. The most important thing for us to build that, again, is to make the business resilient. For that, we need to do three, four things that Nandita and I talked about already.
Anything straight from that is an opportunity, potential or lost opportunity, but we think that not making the business resilient in the areas where we are will be a bigger lost opportunity because we still need to grow. As we mentioned, we need to get to roughly two times the current size. We need to improve the contribution. To be able to do this is the most important thing for us. As the market evolves, I am sure we will find newer and newer ways to grow the market even more than we are able to in this very short term. But I think it is just to prove that execution, to prove that focus, we need to double down on the specific area as of now.
Understand. Maybe just to drill a little bit more. In this quarter, for example, we have seen gross margins maybe reduced by about 110 basis points or so, 120 basis points quarter-on-quarter. Now, with the reduction in gross margins with more private labels, we should in theory see an acceleration in growth. But why is that missing at a, let us say, growth at a store level, right? If we think of orders per store, we are looking only a slight improvement.
Orders per store have actually gone up by close to 9%. If you look at even the average, the NOV per store has gone up by 9%, and orders per day have gone up by 9.5% sequentially.
Okay. I will take this offline. I thought it is closer to 6%, 7%, but yeah.
Yeah. We are close to 1,200 orders per day per store. This is the best ever we have ever been. As I said, you will continue to see traction on this line, which is an important metric for also store-level profitability as well as overall platform-level EBITDA profitability.
Understood. So the thought process right now is that the lost gross margin gets made up in leverage as you leverage these stores and as the frequency continues to improve on these stores.
Absolutely. Yeah. Scale gets along its own operating. Even in the previous quarter, we added 60 basis points. Some of it got reinvested back into getting back into the healthy growth. I think that is discretionary spending, and we will take an appropriate time when we will start harvesting that back again. But the operating leverage, as long as the growth continues, is going to get delivered.
Okay. Understood. Thanks a lot.
Thank you. Thank you very much, ladies and gentlemen. That will be 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.