JM Financial downgrades Swiggy to REDUCE, sets ₹440 12-month price target
Warnings of urgent funding shortfall; net cash to fall to ₹43.5 billion
Instamart losses drive cash burn; 1,062 dark stores across 127 cities noted
Broker urges >$500mn capital raise; Rapido sale estimated insufficient (~₹29bn pre-tax)
Brokerage JM Financial on Friday downgraded food-delivery and quick-commerce leader Swiggy to REDUCE (from Hold) and placed a ₹440 12-month target on the stock, implying downside from then-current market levels. It also warned that the company faces an urgent funding shortfall driven by rapid cash burn and heavy losses at its Instamart quick-commerce unit.
JM’s analysts say Swiggy’s net cash (excluding any Rapido divestment proceeds) was forecast to fall to roughly ₹43.5 billion by September 2025, with quarterly cash outflows running at about ₹10 billion.
The note estimates that even a high-end sale of ride-hailing stake Rapido could raise at most about $320mn (about ₹29 billion pre-tax), a sum the brokerage views as insufficient. JM explicitly recommends management consider raising more than $500mn to create a meaningful capital buffer and support Instamart’s expansion without being forced to sell from a position of weakness.
Instamart Losses & Execution Risk
A central driver of JM’s caution is persistently negative Adjusted EBITDA, with large cumulative operating losses over recent quarters and Instamart being a material contributor to that drag.
JM highlights that Instamart operated 1,062 dark stores across 127 cities as of 1QFY26, fewer than peers Blinkit (about 1,544) and Zepto (about 1,150), and notes Swiggy has sharply slowed new store openings (to about 40–50 per quarter from a 316 peak).
That slower density build raises execution and market-share risks in a crowded quick-commerce industry.
Funding Needs & Model Shift
The brokerage flags the possibility that Instamart will need to shift from a marketplace to an inventory-led model (Blinkit-style) to secure unit economics and service levels. This conversion as per JM estimates could require about 5% of NOV in upfront capital, or roughly ₹14 billion under its FY27 assumptions.
Even if contribution-margin break-even targets are met, JM expects adjusted EBITDA losses to remain elevated for some time.
JM projects consolidated net sales growing from about ₹152 billion (FY25) to ₹228 billion (FY26E) and ₹335 billion (FY28E), with EBITDA swinging from a large negative in FY26 (negative ₹29.4 billion) to a modest positive by FY28 (₹10.4 billion).
Adjusted PAT is expected to be deeply negative in FY26 (negative ₹38.8 billion) and improve towards breakeven by FY28. The house uses a sum-of-the-parts valuation: rich multiples for food delivery but conservative (and in some cases zero) valuation for nascent businesses, and applies substantial discounts where execution risk is high, producing the ₹440 target.
Near-Term Priorities
JM’s clear, actionable recommendation to Swiggy’s board: raise capital now, ideally from a position of strength, to fund continued Instamart investment, shore up the balance sheet and avoid dilutive or distress sales later.
The note stresses that securing funding would reduce execution risk, support density expansion and preserve strategic optionality.
The analysts list upside levers, faster user growth, higher average order values, supply-chain synergies and successful inorganic moves that could materially boost value.
Conversely, they warn of downside risks including slower digital adoption, intensifying competition (Blinkit, Zepto, Flipkart Minutes, Amazon Now), regulatory or labour headwinds, and the possibility of failed investments or technology setbacks.
