Swiggy Limited (SWIGGY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to earnings conference call of Swiggy Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Agarwal, Head of Investor Relations from Swiggy Limited. Thank you, and over to you.

Thank you, operator. Hello everyone, and welcome to the second quarter FY 2025 Earnings Call for Swiggy, our first ever after we recently went public. Our financial results and shareholders' letter have been published on the exchanges, and information pack has been placed in the Investor Relations section of our website, www.swiggy.com/corporate. We would like to inform you that management may make certain comments on this call that one could deem forward-looking statements. Specifically, any 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 me on the call today are Sriharsha Majety, our MD and Group CEO; Rahul Bothra, our CFO; Rohit Kapoor, the CEO of Food Marketplace; and Amitesh Jha, the CEO of Instamart. Over to you, Harsha.

Thanks, Abhishek. Good evening, and warm welcome to everyone. We're excited to join the ranks of listed companies after a decade's journey of growth and consumer love. I'm sure since this is our first call, there'll be lots of questions, not just on the quarter gone by, but maybe also on our journey until here, we have our business leaders on the call today to answer your queries on our performance. And our IR team will be available post the call for more details. I invite Rahul to kick off today's event with some key highlights for Q2, and then we can straightaway get into the Q&A.

Thanks, Harsha. So folks, the key highlights for the quarter gone by. Our B2C GOV clocked a little over INR 11,300 crores, which was up 11% on a sequential basis. This was our second straight quarter of 11% sequential quarterly growth. On a Y-o-Y basis, our growth accelerated to 30% as the business mix also continued towards a shift on the quick commerce side. We saw strong MTU growth with our platform MTU going up by 18% to 17.1 million users. And our consolidated adjusted EBITDA loss down by 30% to INR 341 crores in the B2C GOV -- in the B2C business. The food delivery GOV grew by 5.6% on a quarterly basis. After having achieved profitability last year in this business, margins continued to ramp up to 1.6%, and we have doubled our adjusted EBITDA on a quarterly basis. Our quick commerce GOV also grew at 24% on a sequential quarterly basis, driven by a 21% volume growth. Our orders per day per store also grew by 10% on a quarterly basis, and we added close to 52 stores during the quarter. Despite continued investments amidst significant competitive intensity, our CM margin improved from negative 3.2% to negative 1.9% in quarter 2. With this brief introduction, let's start the question-and-answer session. Over to you, operator.

[Operator Instructions] We'll take our first question from the line of Garima from Kotak Securities.

Congratulations Swiggy team for stellar listing. My first question is on Swiggy Bolt. Now of course, media has reported that you've expanded this program to 400 cities now. My question is how is this model different from the regular food delivery model? And how do you really incentivize the restaurants to prioritize your order over those of others?

Garima, thank you very much as it gives us an opportunity to explain this very exciting launch. So it's -- as we said this is -- so the model works on 2 simple premises. One is that this is serve restricted last miles. So just for example, the -- it serve roughly within -- anything within -- up to 2 kilometers, right? And the second thing is that it is the same menu. So the one big clarification that we want to give away is the same menu, but if you look at their entire assortment, roughly 30%, 40% menus are under 4 minutes prep time. And we've worked a lot with the restaurant partners to ensure that they are not only adhering to the prep time, but also giving it out to the riders without any delay. Plus on the rider side, I think what has really benefited is that we have run the quick commerce business now for several years, and we have some of the fastest speeds in the market in that business. The same principles have been drawn here. So net-net, I think three operating. One is low last mile. Second is definite consumer love because it unlocks new use cases for consumers. Just for example, you want to have coffee, you may not wait for 40 minutes, but if you're getting in 10 minutes, you're on, right, for the order. And lastly, from the restaurant side, they are seeing it as a big unlock for increasing volumes. So they are coming forward and not just participating, but sitting down with us and problem solving on what kind of menus, what kind of offerings, how do get those faster. So all this has happened in the last 45 days of launch, this is also one of the fastest launch businesses we did like from concept to launch event in 30 days. And it hit a scale of 5% of our order volume within 8 weeks. We scaled it up to 400-plus cities, which I think is pretty much all the cities, it needs to be and maybe we'll add a few more. And I think we're very optimistic about the potential it holds for not just this offering but the future of food delivery itself.

Now my question is in terms of average order value, should we regard this concept or this offering is inherently low AOV, because you are just catering to the very quick need that a customer has, which may be largely unplanned?

So Garima, this is Rohit. I forgot to mention my name. I just assumed that since the world has understood, I'm answering this question, Garima. See, inherently not low AOV for the simple reason that except pizzas, every cuisine is on it now. So whether it's biryani, whether it is gourmet restaurant. So even let's take an example of a Bombay, one of the best bakeries of Bombay, the top 5 in terms of not just the popularity, but also the quality and the name they command is on Bolt, because for them also to serve croissants, INR 300, INR 400 individually with a coffee may cost INR 300 is very much part of the Bolt's offering. So we are seeing actually AOV is quite comparable to platform AOVs, and there's a lot of work that still can happen on that front. So this is not inherently low AOV business. And that's one thing which is a very interesting question because you can assume it to be saying that it's just top-up purchase or coffee or immediate items, but it can be pretty much anything. The only category which is -- we haven't been able to bring fully on, but there's work on and we work closer in the next quarter is pizzas.

Understood. Okay. And maybe last question from my side on this. Is -- if you see your shareholders letter mention some of these new value propositions, Bolt is one, there are some affordability and user experience initiatives as well. What do you think is going to be the impact of all of these new initiatives on the growth of the food delivery business?

See, if you look -- Rohit, again, answering this question, if you look at growth, growth can happen in this business from 3 or 4 different vectors. One is geographic, right? You simply go into new cities. We believe that we are close to -- in the food business, we are close to now operating in the number of cities we need to operate because anything beyond that is actually a vanity metric where we can expand another 50 cities or 100 cities, there's not much business to be had there. So that vector is sort of not what we are betting on. The second is what we think is definitely a lot more emphasis on existing cities where migrant population, new colonies are coming up. Just to give an example, we have quite clear, it is becoming quite increasingly clear that places like NCR, Bangalore, we take the top 50 cities, it's not just the core of the city. Today, if you come to Bangalore and you'll go to Devanahalli or you go to outskirt, probably it looks like they drive all the way to Hosur and it still looks like Bangalore all the way through. If you're in NCR, you're driving towards Jaipur, it used to end at Manesar, you can go all the way up to Bhiwadi, Rewari and feels like you're still in Gurgaon, right? So I think the -- what we call the new growth area, that's one. And there the kind of consumers who are coming in also are looking for affordability and rentals are going up in core cities. So we see that there's a lot of new people who come to the city for employment or work, actually go and sit in the -- say in the peripheral cities. And that's where the affordability initiatives become very important. Unlocking new use cases daily, big use case for corporate's lunches. Speed by Bolt by itself like transfers a lot of orders, which would have come from either sometimes like going down to canteen or your own kitchen can be unlocked because the Bolt exists, right? And the interesting part is that now we have seen this in quick commerce as well that we assume that 10-minute or faster delivery will only unlock a certain kind of order -- assortment. That's not true. In quick commerce, it is -- we started with assuming this will be coke, chips and things like that. But today, you're buying like headphones, you are buying pretty much a wide range of items, cosmetics and same is to food delivery. Consumers just lock things faster. It doesn't matter what the cuisine is. So I think Bolt is a big bet here. If you look at user experience, I think that's something we have always prided ourselves on in terms of UI/UX of that and we continue to believe that there's a lot of headroom for us to keep improving that, whether it's eat list, whether it is new features that you see, the clear product evolution on the bulk delivery side, it's not just the vehicle, fundamentally the core products and the restaurant experience in bulk areas has changed in October, bunch of work on the restaurant partner side, self-serve, advertising at scale, I think if you just look at our advertising revenues and what's happening there, I think it's a very exciting story. So overall, we believe all this is bringing through definitely GOV growth, which is in line with what we have been sort of forecasting revenue growth, which is faster and profitability unlock, which is actually much faster. So that's the overall framework we are trying to operate growth with rising profitability in the food business.

We'll take our next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.

Yes, Harsha and team, congrats on the good IPO and also a good set of numbers. A few questions from my end. Firstly, on food delivery. You're guiding for outpacing the category growth, given there are only 2 players in the category, what gives you confidence now that we will be able to grow faster than competition?

Look, I think we are guiding towards category growth and faster growth because numbers are out for both the companies, and you can see what happened last quarter, right? I think it is very hard to say, right? And I won't bet my saying this will be continued this way or that way. But frankly, what we are bullish about is the pace of innovation in food delivery, the number of new launches we are doing, the kind of work happening in the company, the kind of success we are seeing with the new initiatives, all that definitely gives us confidence on 2 things. One is our ability to think through new unlocks for the category itself because it's not a 2-player market. We have never agreed to that definition of 2-player market because, frankly, we compete with everyone. We compete with if you go out and eat. We compete with all kinds of options which people have to eat. So I think it's not our definition of the market. And in the world where we see as a food service market, we definitely see online, we'll be outpacing that. That's there in data. And the set of initiatives that we have launched in the last quarter and what we have in the pipeline, gives us some confidence to say that we have a realistic chance of growing in line with what our predictions are and hopefully outpacing them as we -- in the future quarters.

Sudheer, Harsha here. In addition, I think I also would like to emphasize that if you look at our trajectory over the last 2 years, I think we've also been able to get a lot of progress on the overall contribution and the indirect cost that has given us operating leverage. And overall, with a lot of that work behind us, it also means that there's a disproportionate amount of management bandwidth going on the growth agenda versus we've been able to in the past. It is intangible, but I did think it was important to mention, it has a huge impact on how our mind share and how we spend time energy resources on the growth agenda.

Fair enough, Harsha. And we are guiding for 4 million square feet of dark store area by March '25. That's almost doubling our dark store capacity in, let's say, 4 to 6 months, maybe assuming you're calling it out from September. So what gives you confidence on the pace of addition, number one. And also the demand uptake at, let's say, 2x of our current capacity?

Sudheer, yes, we have mentioned that we're going to be close to doubling the store count while increasing even the footprint size by -- I mean the average store size by 30%. The average store size of 30% is largely also because we did have smaller stores to begin with in past and to be able to meet the growing demands of assortment. It was important for us to do this, and that's the transformation that's underway. As for doubling the store itself, I think -- I mean, as you can see in our Q2 results, we've seen some strong order volume growth. And we do believe that from an overall penetration standpoint, I think we're still relatively early in the overall game. With that, coupled with, let's say, increased competitive intensity, I think we may see some acceleration in overall category growth versus originally planned, and that's kind of why you see us going aggressively behind store expansion in the forecast we made.

Sure, Harsha. And just one last question. I think great to see it looks like on Instamart side, there is some market share gain, especially on the MTU front. A quick clarification based on the internal metrics that you may be tracking, what is our order market share in quick commerce category right now? And what might be our market positioning by number of orders? Are we second or third?

Yes. So honestly, we don't have that data -- Sudheer, Rahul here, and we do believe that we are guiding for a certain growth in the category. We are seeing acceleration of that growth. And I think market, we have seen also some bit of heightened competitive activity from both existing and new players. So it's hard to pin down a certain market share number. It also changes during the day and the week and the month. And I think we are well poised from the expansion ambition that we have laid out that we are going for category-leading growth here.

We'll take the next question from the line of Ankur Rudra from JPMorgan.

Congratulations on the listing and a strong quarter, and good to see the growth pick up across both the core businesses. Maybe on the Bolt initiative, if I could focus on that a bit more again. How is this impacting consumer behavior at this launch because it's a clear innovation that we've seen for the first time in the last 10 years of food delivery in India. Is this creating new demand? Or at the moment, are you just seeing existing demand? What was probably lower order value shift to this? And if you can give us some color in terms -- I think you give us some color in terms of average order value, but also in terms of how the unit economics will work here versus the core food delivery offering.

Rohit here, I'll take that question. 3 or 4 things that we are clearly seeing, and this is a lighter note, I think one of the reasons we launched Bolt was Harsha also wanted Starbucks in 10 minutes, right? But don't take that seriously, this is just a joke with me and Harsha. But I think clearly, 3 or 4 things. One is use cases, which would have not gone to delivery. Simply saying, I want a coffee immediately. I want -- I'm in a hurry, I'm leaving home, I need something in 10 minutes. I've come back home and I'm hungry, right? Not ready to wait for 30 to 40 minutes, craving, late night desert, like I want to have an ice-cream before I sleep. So just the fact that you really compress the time of delivery from 30, 40 minutes to 10 minutes, unlock human emotions and needs and use cases in disproportionate ways, that's point number one. The second thing which we sort of went again was saying that can it be only delivered by a captive cloud kitchen? The answer is no. Because there are enough density in Indian cities and we are so dense in all our markets that is we can get agglomeration of restaurants and consumer point within 2 kilometers of each other, right? So that creates a positive flywheel on the restaurant side because they see more demand, positive flywheel on the consumer side, they get the -- when you first time get coffee in 8 minutes or 9 minutes, it feels like magic, right? And you just get hooked on to that by saying that this is something that is so cool. Let me just go and try it again, right? Third, on economics, we can't share due to competitive reasons sight, no. But frankly, I would say that that's something which is not worrying us at all on this initiative. And we're fairly confident on managing the economics of the business as we scale up.

Just one clarification on Bolt. You mentioned in the prepared remarks that it's grown to 5% of the volume in the 8 to 10 weeks of launch. Is this adjusted for the locations where it's launched? Or is it an increase to 5% of overall volume?

It is platform. It's platform, overall platform.

Overall food platform, right?

Yes, it isn't adjusted. Yes. Food platform, correct.

Okay. Okay. No, that's great. And that's creating significant impact then. Okay. Fair enough. Super. Just maybe a quick question on quick commerce too. You've highlighted there is incremental competition or heightened competition. And you're clearly upping your dark store targets which are doubling over the course of the year and from here also doubling the footprint. How has the competition impacted your growth plans more recently? And what is the doubling of the footprint over the next 6 odd months impact medium-term profitability?

Ankur, Harsha here. At a high level, I think what happens when, obviously, there is increased competition, there is typically stress on a few line items. Of course, I think marketing spend, there is bound to be some stress. I think like there is continued store expansion in various cities that happens. And there's also like incremental -- small increases even in, let's say, pricing that do come up for the day. Now as you rightly pointed out, we actually are from a point of -- where we are today, we're going to add a significant number of stores in the next 4 months. And our guidance, as we have given even in our letters is that we're gunning for overall CM0 of Instamart to be hit by OND of '25. So the reason why we believe that is, in the short term, we will need to modulate our investments to stay competitive. We have our eyes on the price. That is the $30 billion to $50 billion market that we're all playing in 3, 4-year time frame. And we will need to be competitive and be dynamic in the landscape to be able to ensure that we have a good journey to a long-term sustainable business. As for the journey itself, as we play this whole competitive intensity and market out, there are still, however, things that are in our control. And some of them will be like, let's say, the AMV, which we have talked about. As we increase our assortment on the Instamart platform, we do expect the AMV to go up from where it is, we have some opportunity even in our advertising business as a percentage of the overall business. And then this rapid expansion of stores that we're going to do in the next few months will also lead to some increasing maturity of the overall store profile as we approach OND 2025, now when you take all of that and pricing, whatever we can price in with the information we have available about competition, we feel the guidance that we want to give is that CM0 for OND '25. In the interim, as we mentioned, we will have to modulate and be responsive in the market based on what we are seeing.

Very clear. Just one clarification, because this is an evolving situation and evolving market, if there will be growth versus margin trade-offs in the short to medium term. Would you always focus on the long term and growth as opposed to medium-term margin, especially in this business?

I think like with all things, we have to constantly keep our eyes on the long-term, Ankur. In today's market, we will have to be dynamic and react to make sure that we don't become less competitive beyond the point like in the short term, but we firmly have arrived at the same time on the things that we can do to differentiate in the medium, long-term, spoken about it in the past, we want to make a big push on assortment to do a great job over there, to create some meaningful differentiation. In addition, you've also seen us start experimenting with categories like pharma, where we're getting consumer feedback, and we want to learn more and see what we can do. So the answer is, firmly have our eyes on the price for the long term and modulate in the short-term basis intensity that we see.

We'll take our next question from the line of Samarth Patel from Equirus Securities.

Thank you so much for providing me the opportunity and [Technical Difficulty]

We have a question from the line of -- the current participant's line is disconnected. I request [ Mr. Bijal Jitendra Shah ] from RTL Investments to go ahead with this question, please.

Congratulations on a great listing during turbulent times. My question is with respect to your announcement that you -- have you all decided to get into sports business or owning sports teams, so can you just elaborate on that? And with respect to that, what kind of investments you are looking at? And how would it impact the guidance which you have given during this -- in the investment in the shareholder letter?

This is Rohit here. Let me take this question. First of all, I think just to clarify, we are not getting into the sports business or -- in any significant way. I think that headline which has appeared in one of the press articles is slightly -- we'd like to clarify on top of that. What we have done is, we believe that our consumers, especially in the top metros are -- see pickleball as a very fast-growing recreational activity. In fact, pickleball is one of the fastest-growing sports not just in India, in metros, but all over the world. In some countries, it has outpaced even tennis and there was an opportunity for us to be very early in the game, acquire the rights to own one of the teams in the world, Pickleball League, which will be launched very soon. We have gone and acquired the Pickleball team rights for the city of Mumbai, and that's a very limited play that we have there. The company has being formed because it is a subco, it had to be formed for that reason. Again, clarifying very clearly, we are not getting into sports business or sports events, et cetera. Very specifically, it is about acquiring the rights to that team at this point in time. And I think that is what it's all about.

So is it only about...

Diversification happening into sports events or anything of that nature.

Yes. So this will be -- I mean, can you confirm it will be limited to this single investment or you would be exploring more things going forward. I mean, as of now, it might be one investment, but later on.

At this point in time, it's purely restricted to owning rights of owning the Mumbai Pickleball team. There is no other plan at this point in time to expand and dispose at all.

We'll take our next question from the line of Swapnil Potdukhe from JM Financial.

Congrats on your listing. I have 2 or 3 questions, starting with delivery first. What -- in this quarter, what I notice is that our take rates have come off on a quarter-on-quarter basis, and that's about 30, 40 basis points of decline. Any particular reason you want to call out, given that we have also mentioned that our ad income continues to improve? And how do you see the take rate going ahead? So if you can start with that.

Swapnil, Rahul here. So there's -- if you look at it sequentially, there's a small decline largely to do with some of the affordability initiatives that we have run, including our -- the subscription program where we continue to see the expansion of the subscriber base. And as a result, there's lower delivery fee income that gets recorded. I think from a medium-term guidance, we do believe that there's another 150 basis points improvement that we need from here on in the -- to our guidance to steady-state EBITDA of 5%, and we are positive to be able to achieve that.

Got it, Rahul. The other question is with respect to the investments that we have been discussing till now Cafe, Bolt or Daily those kind of things, just wanted to understand how they get -- where are these investments exactly coming? Are they coming into our segmental -- segments for them or they are getting captured in platform innovations?

Sure. No, so depending on -- Rahul here again. So depending on the specific initiatives, most of the ones which are at scale today are being run under the food delivery platform. So whether it is Bolt or whether it is Cafe, they are housed under the food delivery business. So these are not separate innovation.

Okay. And so -- and there was another partnership with the HDFC Bank that we have been running for some time now. Any positive impact of this partnership on your order volumes? Anything that you want to call out on that side? And a related question to that, please. There is also a significant benefit that the consumer gets in terms of cash back. So I just wanted to understand how the unit economics works there because that 10% cash back is meaningful. So how much do you bear out of them on your own P&L?

Sure. Yes. So Swapnil, so the co-branded card that we run along with HDFC Bank is one of the marquee co-branded credit cards out there in the market today. It has significant benefits that consumers get access to across the Swiggy platform. As you know, we have a single app and across the services, consumers get a 10% cash back on the spending across the platform. The good news for us is that all of this is funded by our partners and there is no economic loss that we have on account of this cash back proposition. So this is a very, very strong program, and we are very happy with the initial takeup that this program has given us.

Anything you would like a call in terms of percentage volumes coming from this card or number of users, something like that?

Specifically, we won't be able to share any specific around this due to it being competitively sensitive.

Got it. On the quick commerce side, I had one question. So obviously, your contribution margins have improved meaningfully, partly due to adding comment and you would also have got some operating leverage and dark store level, but one thing that I'm not able to reconcile is there have been a meaningful increases in your supply chain business. If I were to look at it from a Q-on-Q basis or a Y-o-Y basis, the losses in those business have increased meaningfully, whereas your top line continues to grow. And my understanding was like there would be some operating leverage in that business, given that initial investments we have done with. So just wanted to just see, is there any overlap between your Instamart business and the supply chain business in terms of cost as well as revenue. And how should we read that going ahead?

So on the supply chain and distribution business, as we have mentioned in our letter, it is our B2B business, where we are delivering to wholesalers, retailers and kiranas, including housing of the LYNK business that we acquired last year, which is into urban distribution, technology-led urban distribution for the FMCG companies. So here, most of our near-term efforts has been in expanding the overall capacities by introducing warehousing as well as logistic services. And that investment has been made. And we do believe that sequentially from here on, we will see continued improvement in our profitability trajectory for that business segment. So most of the near-term investments are behind us. And sequentially, we should see an improvement in the business going forward. And to note that today, if you see in our business, we already crossed 1 lakh unique customers that this business segment directly invoices to and we expect to continue increasing the share of the kirana business in this segment.

But the related question to that was like what are the overlaps in terms of costs with your Instamart business? I mean, do you use the same warehouses? Or do you use the same mid-mile logistics? How does it work? Or do you have separate teams altogether.

So as we have mentioned, the Instamart seller today use certain services of our platform. Warehousing is not one amongst them. But as we have increased our overall capacities and increased our warehousing infrastructure, we do expect to utilize -- to make the Instamart sellers also utilize some of the warehousing space that will have a consequent increase in our take rate in the business. So as we expand our overall service offerings in this segment, we do expect to leverage or make use of the capabilities that have been in this business for Instamart sellers also.

Okay. And just 1 last one, if I can squeeze in. So while we saw a meaningful improvement in your contribution margin this quarter in Instamart from 3.2 to 1.9 (sic) [ negative 3.2% to negative 1.9% ], your guidance seems to be a bit conservative for breakeven. Any particular reason that you want to call out because if take rates are expected to increase, one would have expected most of that benefit to flow through your contributing margins?

So Swapnil, you're right that we have been able to showcase an improved trajectory in our contribution margin profile with better utilization and cost reduction in the business, and as well as increasing take rates. I think Harsha talked about that some of the near-term competitive intensity we have seen. We are also expanding significantly our dark store infrastructure network in the near term. And so all of that is factored in, in our overall guidance of CM breakeven in another 3, 4 quarters or the December quarter of 2025.

We'll take our next question from the line of Vivek M from Jefferies India.

A couple of questions. The first question is on the -- so your food delivery business, I know still is at an early stage, but you are a sizable player with sizable GMVs -- GOVs. What is the trend that you are seeing on the ground? Because a lot of consumer companies are talking about slowdown. The quick service restaurant industry has been dealing under pressure with the SSS number negative. What is -- if you just -- if you can just talk about how the landscape is on the consumption side, that will be very useful.

This or Rohit here. So while I think, obviously, we have also read in about overall slowdown and some sectors slowing down, it looks like we happen to be in 3 categories where we are not seeing impact payout, at least in the last quarter, even at present. So if you see food delivery has grown about 5.6% quarter-on-quarter, Instamart is growing 24% quarter-on-quarter, Dineout which is -- the out-of-home category has grown about 11%, 12% quarter-on-quarter. So -- and if I reflect on what's happening right now, we don't see this pattern playing out. So 1 of 2 things could be that these sectors are more insulated from some of the slowdown discussion is happening or between the food space itself, online delivery is actually pacing ahead of our overall food market growth, food market -- could be that playing out as well.

Got it. And just as a follow-up, so when you -- because beyond your numbers, you will be, let's say, meeting the restaurant partners, talking to them. Do you think there is -- or do you get a sense that there's -- the partners are, let's say, going through a bit of a slowdown pressure right now on the dine-in side of things?

Actually, on dine-in side, that's what is reflected from our business because that's what we concentrate on. We are not seeing that happen. The Dineout business or the going out business, large part is actually Dineout, has grown about 11% to 12% last quarter. And seeing pretty strong momentum there. So it looks like at least the segments we are exposed to at present at this point in time are pacing well.

Right. But my question to you is when you talk to restaurant partners, do they complain about things being slow on the ground or you also don't get that sense from their side?

Again, very segmental because there's nothing a called restaurant partner. There are QSRs, they have chains, there's a kachori shop, everybody is a partner, we a few lakh partners on the platform. I think maybe few, it depends, few segments are definitely, they talk about some slowdown happening in the category, but also the slowdown at an individual player level may not happen because the category is slowing down, but also new competition is coming up. So for example, there are cities where -- I think there was 1 pizza player, 2 pizza used to dominate, now there are like 20 pizza players in the market. So it's also the slicing of share, which is happening, interest rate between those players, which could be reflecting on individual player discussion as we speak to them versus the overall category being impacted per se.

Okay. Got it. And the second question is on the quick commerce business and apologies, I joined a bit late. So in case if this has already been asked. But there's a tremendous amount of activity that we have seen in this space. And now that the new players who have entered the space. What is the -- and anecdotally, it looks like that they are discounting far more than, let's say, the incumbents, at least 2 out of the 3. What is your sense on how things are on the ground whether you have to retaliate or you have to match some of the discounts and also the assortment in case of, let's say, Flipkart and BigBasket, BB. I think they are far more -- so let's say, my understanding is you started more so as incumbents with grocery and gradually pivoting and going into other adjacencies, whereas those guys are -- it looks like it appears that they are far more heavy on the, let's say, the electronic side of things. Does that also require you to rework your assortment? And what kind of discounts and let's say promotions you will also have to run?

This is Amitesh here. See, the way this overall business is essentially growing is basically consumers essentially coming in and asking for if they can purchase more from the faster delivery platforms. The way we are looking at is the TAM that was earlier maybe only a distress TAM, is now expanding to a more holistic TAM of saying that there are items that I can purchase around my area, which I can get an example in 1, 2 hours, I would want to get all of that in the next 10 to 15 minutes. So our view is that, that expansion will keep on happening. The growth will be largely essentially fueled by that. Now in this market, obviously, more players will essentially come in, I mean, the overall intensity on ability to spend more money in the market will essentially grow. If you look at any business long term and especially the retail assets of the business, there are fundamentals of business, that is what makes it a success or a failure. The fundamentals are what kind of assortment you have, what kind of service that you gave, and ultimately, what kind of value that you essentially pass to the end consumer? We believe that there is a combination of that, that will essentially work for the end consumer, specifically because of the nature of business being that, that you can't have unlimited assortment, okay? So the way to look about these business is, there are people who will come here and try to essentially grow the business by expenditure, there are 3 kind of expenditures which are there. One is infrastructure, you have to grow the business, you have to have the infrastructure in place. The second is essentially marketing, convincing more people to come on the platform and experience this. And third is essentially discounting. Infrastructure and marketing will pay for itself. Ultimately, customers come in, they get secure with the platform and that solves the problem. Discounting can only work through a limit because what we have also seen is that unlike other businesses, example like in food, it's not an unlimited discount business because ultimately, you are not trying to create a market, the market already exists. People buy especially at certain prices that our various channels that serve the right kind of purpose for the end consumer as well. The ecosystem will not allow it to move beyond a certain limit of discount that we are speaking about. So there is a limit to the amount of money that can be spent on as a discount. The way we look at it, that if you get these combination of these 3 right, ultimately, we will be able to find out the right answer. And that discount or whatever you are doing in terms of those will be essentially a limited play. The long-term play is can you expand geographies, have the right infrastructure in place and convince more customers. Convincing of more customers is both essentially are you informing more customers as well as do you we have the right value proposition, Harsha spoke about pharma, we spoke about increased assortment, all those are the right kind of value prop that is essentially going to come in.

Got it. And just a small follow-up. Do you think in the interim, therefore, because of this, let's say, heightened competitive activity, the profitability can be far more volatile than the steady state level that you or whatever the breakeven that you target to reach. Can there be a bit of a volatility and you may actually see discounts and -- you also need to retaliate with more discounts and promotions in the shorter term, at least? Or do you think that...

I think -- Harsha here, actually, that is the reason why we've chosen the guidance for the CM0 to be like OND '25 quarters. In the interim, it is really hard to predict how the competitive environment will play out, and it is extremely important for us to stay close to the ground and stay competitive and be agile and make sure that we preserve our competitive position for the long term.

So Harsha, on that point, does it remind you of -- I don't know, 2018, 2019, when there were like 7 or 8 food delivery players and there was, again, a similar heightened competitive activity. Are we somewhere there in quick commerce right now or getting there?

I think there are many, many differences, of course, between food delivery category, under the quick commerce category. I think if you look at, let's say, how the overall cost, supply chain et cetera, constructive, they're very different from what they were because even those were being figured out as we grew the food delivery category. I think there were 3, 4 players even then. So to that extent, that's been similar, but the businesses are very different. And for the stage that we are in, that was year 4, year 5 of food delivery. I think this is year 4. Overall, I feel like that it's a lot better constructed than food delivery, but beyond that, these are different businesses with different modes and differentiation that was altogether so the differences end there. The similarities end there, there are just 3, 4 players, and competition will be here forever.

And Vivek, just to add, this is Abhishek. Obviously, food delivery, a lot of the investment in terms of the competitive pressures that were there in the early times of food delivery were because the category creation in itself implies that people had to be gotten into the habit of ordering in food, whereas the need state for this on the quick commerce side already exists. You don't have to create that market. So that is a fundamental difference between the 2 and hence slightly different.

We'll take our next question from the line of Abhisek Banerjee from ICICI Securities.

Congratulations on a great set of numbers. So I have a couple of questions, but before I get into those. Just to clarify a point that was raised previously. So with regards to the warehousing that you are seeing that your supply chain business will do for your sellers on your network. So as of now, you are not earning that revenue either, right? So it's not like -- so basically, you are missing out on some revenue because your sellers are warehousing outside. Is that understanding correct?

This is Rahul here. Yes, that's correct. As I said, as we have expanded our overall supply chain infrastructure investment, we do expect to leverage this capability to also be able to provide this service to our Instamart sellers which will help us to increase our take rate.

Super, super. So obviously, that rules out any question of inflation of margins. So now just to come to the point of the take rates going up, which you have spoken about, from 15% to about 20%, 22%. So what -- I mean, what do you think will be the primary lever for this take rate expansion? I mean, among your portfolio, whatever assortment improvement you do and the other things. So if you could give us some sense of that, that would be very helpful.

Sure. So I think I'll give some flavor around what are the sources of some of them. And we've talked about the advertising business being a key lever for take rate expansion as well as the EBITDA margin. I think we are seeing increased take-up from the FMCG industry in this segment of the business. And our overall at a steady state, we expect it to be in the zip code of 6% to GOV. So that's one area of improvement. The second would be the overall delivery fee construct. We think that today there is a certain amount of subsidy that goes into the business, both through the subscription program as well as getting users acquainted to this new service. Over time, there is expected -- expectation that there will be a certain increase on the delivery fee. The third is the business enablement services that we talked about. We continue to expand the bouquet of services that we provide to our set of partners, and that will help us to also increase. So these are the 3 sections of where the revenues we get to steady state of 20% to 22%.

Understood. That's very helpful. Now if I look at your orders per day per dark store metric, that has gone up very sharply over the last 1 quarter. Now obviously, the first thought process was efficiency improvement. But in the shareholder letter, we also read that you been increasing the size some of your existing dark stores. So would it be possible to give a sense as to, I mean, how much is for the efficiency improvement? And do you also track a metric like orders per day per square feet. And so that will give us some clarity on that aspect?

Abhisek, I think it's too early for us to start measuring that as a KPI, considering the fact that we are in a growth investment phase. I think some of these numbers will also have denominated impacts with the pace of expansion. So I think we are seeing very good take-ups. I think if you look at some of the mature stores, we do anywhere between 2,000 to 3,000 orders per day, right? So that's like a good indication of what the overall sustainable GOV per square feet will be in this business. So we are seeing -- and therefore, as a KPI to be start reporting that likely be sticky in the near term. But over the medium to long term, you should start factoring more closer to like a 2,000 orders per day per store to be the steady state guidance for this business.

Understood. That is again very helpful. Now if I were to try to understand the assortment piece. Now you're still trading a little bit on the average order values for the quick commerce business. And what are your thoughts on expanding this from here on? And I would really love to hear some of Amitesh's thoughts on the assortment part given he has also done this in great detail in one of your competitors.

Yes. Yes. See, again, the way we look at it is that consumers have a monthly purchase requirement. That purchase requirement obviously has the biggest element of our groceries and then obviously, there are other categories in place. So the way to think about it is that how deeply penetrated it can be in their monthly purchase bucket, and that is what how every e-com company in the world also looks at. The way to and how does that really translate to the way we do business is in terms of what assortment you have in those specific essential categories. In India, obviously, grocery really dominates in terms of the monthly baskets as well and increased assortment in the grocery basket is also a very, very important happen because that allows for the kind of choices that makes a heavier basket in general. When you compare it with offline where the number of units per order are higher. A part of that is also driven by some of the level of choices that they are looking at the micro market level. Non-grocery, one of the biggest mover is always that when you increase the assortment of that, the higher AMV essentially comes in place, which is the case in case of small home appliances, electronics, all those items are the pieces that generally move towards a higher AMV as well as where the rupee gross margin that you earn on all of these items are also higher. Okay? So if you look from the perspective of a consumer, there is a specific market that the consumer has to offer. That constitutes multiple level of AMVs, and that AMVs have a different level of essentially rupee gross margin that they can give. The ability to get into all those AMVs that have higher rupee gross margin will be the key to success and which is where the market is also moving towards. The other thing that we are also doing, Harsha spoke about that, is that we are also looking at other categories like pharma, that generally has a good use case in the sense that they are more repetitive and it also gives a very high recall value as well because it is one of the things that you essentially need. The idea being that, again, I will come back to my whole view of the offline -- there is an offline market around you. It moves from a hardware store to a pharma to an FMCG stores. The idea being that in the apartment that you have, can you essentially cover all of them or not, and when you cover all of them, AMV increases and the rupee gross margin also increases per order.

Good. Got it. So just a follow-up...

Abhisek, I request to join back the queue, please, as we have other participants waiting for their turn. [Operator Instructions] We'll take our next question from the line of Abhishek from Nomura.

Congrats to the management on listing. I have 2 questions. First one is on the food side, you explained multiple times that innovations are one of the pillars for your sustained growth and maybe a market share gains. Could you explain how sticky are the benefits of innovations like Bolt. And if you can talk about some past experiences probably helped you in terms of MTU for example, in this quarter we're seeing 5% increase in MTU sequentially, but what prevents the other listed company from coming up with a similar product.

So look on Bolt, frankly, I can't comment on the other listed companies and what their brands are or could be. That's not my limit -- this is Rohit here. I feel that this is a very hard to execute product as a launch because it is not coming from a single store. Even that is almost hard to execute and scaling up. It's coming from a set of partners who are used to operating in a certain way. There is all the complexity of urban and metro India operating here. There is the complexity of 10-minute promise to the consumer being executed. There is some past launches which have not worked in the category before. I think in light of all that, the complexity itself is sort of a time mode by itself. Now who does it then? Very hard to comment. The consumer love is clear, and it's an extension of what we are seeing across India where category after category, including food, consumers are voting with their fees and wallets saying, if you deliver to us great quality at speed and speed is defined, now 10 minutes is becoming sort of a benchmark. There is more usage, more use, and we are seeing definitely more new to category consumer, new to our platform consumers coming in as well as repeats going up. And not just in what could have been expected as snacks or breakfast slot, but even other slots as well, either classically peak slots like dinner or lunch.

All right. And then second and last question is on your loyalty program Swiggy One. If you could share some numbers...

Abhishek, may I request you to join back the queue, please, as we have other participants waiting. We'll take our next question from the line of Aditya Soman from CLSA.

So quick question from me. So on -- one of your competitors, they obviously have a cafe business within quick commerce. Now is there sort of an imminent plan to just add something along those lines within quick commerce. And do you see that as a business that would allow for higher AOVs and profitability or not?

Yes. This is Rohit here. I'll take that question. Right now, if you look at one of the offerings you have is Swiggy Daily and Cafe switch caters to a certain use case. And also, I think frankly, we see that as a complementary to the Bolt covering itself where a similar services are available to the customer. I think what we are concentrating on 2 things. One, on Swiggy Daily and Cafe, we're working with our partners to get the pod configurations right, get the economics right, and it looks like they're shaping in the right direction. Same on Bolt, I think we have scaled up to 400 cities. So we can light up the 10-minute delivery in 400 cities now. I don't think there's any other player in the market, which is even there in more than 5 or 10 cities or maybe 15, that's the range you're talking about. We are already in 400 cities. I think that's a mountain to climb for anybody who wants to come in and will take a little bit of a more time for sure. Now with the backend in place with Cafe and Daily, the choice of lighting it up in Food or Instamart remains with us. And that we will see over time what makes more sense to do and what the consumer is looking for. So I do think the whole architecture is in place for us to circulate a 10-minute food delivery ecosystem from multiple angles. And that's what we've been building

We'll take our next question from the line of Gaurav Malhotra from Axis.

Just 1 question on the dark store size and delivery times. Now you mentioned in the prepared remarks that there are also large size dark stores of almost 10,000 square feet where maybe the assortment size number is more and possibly the delivery times could be longer. Obviously, the -- no one daily needs anything 10-15 minutes, but that's where the business has shifted, whether it's food or quick commerce. So then aren't we sort of maybe away from that construct. So just thoughts on that, please.

I think what we're trying to do, Gaurav -- so I think if you look at, let's say, what is clear, it is clear that consumers want more selection. It is also clear that we can't have an infinite collection in 10 minutes. And I think it will mean that we'll have to keep having selection at the right density and the right speed levels to be able to meet customers' needs as well as build a viable business over here. Of course, I think consumers would love if they could get hundreds of thousands of items in 10 minutes. I think operating model that you all have in the quick commerce category today, that paradigm allows us to get like close to 15,000, 20,000 items at best in 10 minutes. And if you want to go higher than that, then you will have to take a small trade-off on the overall density and therefore the speeds. So the assortment that will be extended from let's say the 10,000 will be at a higher delivery time than the 10 minutes, it could be 10 to 30 minutes. And we do this seamlessly through what we call a split cart feature that we have, where for a consumer, we abstract out the complexity and allow them to add the items that they want, and they come 2 deliveries.

We'll take the next question from the line of Prateek Maheshwari from HSBC.

Since the time of DRHP, if you look at the city expansion for the quick commerce business, I think it was mentioned earlier, 43 and this time, it's 53 cities that you guys are -- and we have the understanding that probably you guys would have reached the number of cities that you wanted. I would now expand or lower your already spended cost in terms of other infra, right, and expand it to other dark stores. So just wanting to understand if you guys have reached somewhere on the optimum cities and now you guys will spread those investments or we could probably see further additional cities as well?

Yes. See, one of the strategies and Rohit was also speaking about is always to keep on expanding to the markets that are essentially relevant for us. So with that context, we keep on expanding. That expansion means deeper into the cities that we essentially have and also going into cities where we see clearer opportunities exist. We look at a target of around 75 cities for our growth, which is something that we believe is the market very clear and essentially present. Obviously, we'll keep our ears look to the ground. We try to understand how the markets are behaving. There have been cities that we have entered where the orders per day has reached half of what we thought it will do in essentially 3 months within essentially 2 weeks. So from that perspective, I think there are a lot of places where we will get a surprise. So the way to think about it, there is a plan in place, but we will keep our ears close to the ground, see what is happening and then move forward according to that.

And Amitesh, could you also comment in the new cities that you have entered and been surprised, is there the mix of GMV different than the -- that you would have thought earlier or maybe it's different from the top 8 cities that you guys would have already expanded a lot in, could you also comment on that?

I can't go into specifics, but at a very high level, the customer -- the way they are responding to the platform is actually quite similar across the board. It generally depends on the segment of the consumer rather than the city.

Okay. And in terms of, again...

I request you to join back the queue, please, as we have other participants waiting. Ladies and gentlemen, due to time constraints, we'll take our last question from the line of Tejash Shah from Avendus Spark Institutional Equities.

Congrats on good listing. Just one question pertaining to quick commerce. The nature of the recent fundraise by the competitors suggest that perhaps the quick commerce model is gradually opening up or gravitating towards inventory ownership model. So first of all, how do you assess the shift? And how do you perceive threats and opportunities in this model if it all if we have to participate?

Rahul here. So I think the business model is well established, which is an inventory-light model, it's a low on investment model. I think while there is the opportunity to do an inventory-like model, we don't believe the economics of it justified for us to be able to invest in that business expansion. So for now, the model is well established. We see a pretty good benefit not only on the numerator, but also on the denominator savings coming through the current marketplace model.

Ladies and gentlemen, that was the last question for today. On behalf of Swiggy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.