Swiggy Limited (SWIGGY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the 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.

Thanks, operator. Hello, everyone, and welcome to the fourth quarter FY 2025 earnings call for Swiggy. Our financial results and shareholder letters have been published on the exchanges, and the information pack has been placed in the Investor Relations section of our website, www.swiggy.com. We would like to inform you that the management may make certain comments on this call that one could deem forward-looking statements. Specifically, the financial guidance and pro forma information that we will provide on this call are management estimates based on certain assumptions and have not been subjected to any audit, review or examination procedures. Swiggy does not guarantee these statements and has not obliged them 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, CEO of Food Marketplace; and Amitesh Jha, CEO of Instamart. With this brief preamble, let us start the Q&A. Operator, you can please go ahead.

[Operator Instructions] We will our take the first question from the line of Ankur Rudra from JPMorgan.

I wanted to start on the food side of things. You made a statement about expanding your Bolt initiatives to 500 cities. You've given us some color there as well. I just wanted to get a bit more clarity in terms of what your experience has been? This is in the context of your peer actually shutting this line of shorter duration, food delivery down, suggesting demand has not been as helpful. Can you maybe talk about what you are seeing different, which gives you more confidence here?

This is Rohit here. Let me take this question. So first of all, Bolt has grown at a fast pace and contributes 12% of overall order volumes today. Having said that, look, this is a category by itself, in a way, and I dare say not just in India but globally, and it's less than [indiscernible] vintage. So we are building it very purposefully and thoughtfully. The AOVs on Bolt are within range of platform, and there is no significant concern we have on the economics of this business. Obviously, I can't go into the details of economics for competitive reasons. And just to provide more clarity, there's 3 parts to a Bolt order. So if you think about it, orders that have already been delivered in 10 minutes, of which the percentage is very low, because the network does needs configuration towards the, let's say, 10 minutes or thereabout it's delivery, right? Second is also the people choose 10 minutes over normal delivery platform because it just makes sense for them to do so in the [ meat ] case. And third is actually [indiscernible] orders, which are due to new use cases or some users that would not have been our core, right? It's a fairly decent number even at this early stage. And we believe that we can continue to build this over time to become more and more relevant for the consumer from an instrumentality standpoint. Equally important, both [indiscernible] a very valuable to the platform. Also remember, these orders are shorter distances. So when you're looking at economics, just want to conclude, it is not the AOV what matter but also the delivery cost of lower last miles.

Just moving to the quick commerce side. I wanted to first get a comment on the net order value growth or the GOV growth this time. The NOV growth was around 16-ish percent, GOV around 20%. Now this is a bit of a acceleration but not meaningful given the context you've had 3x the number of store addition this time versus last quarter. Maybe can you talk about perspectives of what drove that difference versus last time? And if you can also add any updates on store addition from here given you have achieved your previous targets?

Yes, absolutely. This is Amitesh here. You see a way we are looking at our growth is always in essentially 3 metrics. One is how many MTUs that we are essentially adding, our acceleration in growth has happened there, especially primarily. How many stores we add. And of course, that which you did have seen, what is the number of orders and the NOV that we essentially get. From that context, our growth or the indexation of our movement in this particular quarter was MPU growth, was making sure that we open a lot more stores to expand our network. Since these customers that have been acquired are new and the stores that we have gone are new. The overall spend per customer for this specific cohort will be lesser. And which is the reason why you don't see a really tie up between what we see in our MTU growth as well as in terms of our NOV growth. So the way to think about it is, yes, we have expanded our business. We have invested in the right places to make sure that we have acquired customers, making sure that we have higher repeat rates in the subsequent quarter will be the main focus of our business. On the other side, in terms of how many more store growth? See we look at our stores in terms of 2 ways. One is how many cities we are essentially going into and how deep we are actually going into our city. So from a context of last quarter, it was mostly to go into a lot more cities to understand the control of how consumers are actually going to react in those specificities. And the way we are going to look at it is based on those reactions, we are going to look at deepening our presence in some of these cities to make sure that our expansion is more sharply focused rather than essentially widely focused.

Can you talk a bit more about the 2 new initiatives this time? One is on Maxxsaver? I know there's only probably been a week in the last quarter, but maybe for this quarter, how does the unit economics for that look given it's a lot more value focused? Is this going to dilute take rates and contribution profits? And similarly, for Megapods, given that now you have quite a few, any kind of color in terms of how do the store economics there looks versus any regular store at a similar stage of evolution?

Sure. The -- okay, the Maxxsaver and the Megapods are mostly based on the consumer back understanding of the need -- that there are various missions that [indiscernible] consumers have. The primary mission that everyone was, first really targeting towards was obviously to make sure that any kind of top-up that is there in [indiscernible] groceries, what we essentially look at. When we move beyond our consumer base that are looking for more options, there are 2 primary use cases that came up. One is obviously, the country being very value conscious. Can we provide some value to the end consumer? And the second is what are the options that they have. Now both of them are AOV acremental as well as making sure that we give more SKUs to the end consumer as well. Structurally, the Maxxsanever option, which kicks in for a majority of the customers at greater than [ INR 9.99 ]. So the -- it's -- the economics overall is not very actually different. There is obviously a discount that we give to the customer. But the fulfillment cost advantage that we get out of a higher order value allows us to be in terms -- allows it to be at the same essentially ballpark. On the Megapod side, which is incremental in terms of AOV for us as well as in the number of units that we are actually trying to sell. That is without any extra incremental cost on our variable spend. In terms of profitability for a Megapod, it is very hard to sell [ telemediately ] because a lot of these Megapods are new, matured Megapod which have come up in places where they were already mature. It is -- it has actually the highest profitability for us. So yes, if you look at maturity of the pod and the Megapod existing there, our probability is actually quite good because AOV is higher as well as the throughput.

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

Congratulations for a good performance in your food delivery business. But I have a few questions on your balance sheet side. I think there has been a significant decline in your cash balances this quarter by around INR 1,500 crores, which is meaningful. I can understand part of that is because of the losses in quick commerce business, but then there is also a INR 500 crore increase in the working capital investments and CapEx of INR 425 crores. And this is despite the fact that the store additions is just about 300. I mean both numbers look to be significantly high.

Sure. I can take that. So Rahul here. See, if you look at our CapEx investments, we have added 314 stores last quarter as well as we have been increasing our warehouse footprint, and that has led to the overall CapEx deployment. We do believe that a large part of the overall CapEx cycle that we had started for the deployment journey is now behind us. And going forward, you should see that reducing in a significant way. On the working capital side, this is more of a point in time period. You should see some of it starting to come back. There is the difference between -- I know we have seen some of our advertising revenues that we collect from brands, there has been an increase in the number of days outstanding. But that should correct in the next quarter. So that is not a permanent change, but more of in the quarter change.

But Rahul, if I were to extend the question. See, if -- our competitor has been reporting CapEx of around INR 1 crores, including the dark store plus the warehousing and they also added around INR 300 crores of stores this quarter. And their CapEx was in line that kind of an increase. But your store additions, I [ understand ], 316 is a fairly high number. But still, the CapEx is [ 425 ] that intuitively tells me that your spending -- could you be spending significantly more on a per dark store CapEx.

No, that's not correct. So as we had guided, our per dark store expenditure is not more than INR 80 lakhs. It could be higher on the Megapod. But overall, we do -- don't spend more than that. I think, as I mentioned, our warehousing capacity expansion has been done, as you've seen, our growth has been accelerating. Over the last 3 quarters, our growth has accelerated from 76% to 87% to 101% on a GOV basis. And that -- to support that accelerated growth, we have been increasing our overall warehousing footprint, which as I said, which will help us deliver the next couple of years of growth.

Okay. And with respect to your working capital investments, you mentioned some increase in your ad income and that would have inflated that number, I understand. But still, can you help us understand what was the increase on -- in the ad income or any number to justify such a huge increase in your working capital?

As I said, it is more of a collection efficiency, and we do expect this to meaningfully come down in the next quarter. So you should not see this as a structural change in the overall working capital cycle of our business.

Okay. So the next question is on your guidance per se. Now it seems that you have tweaked your guidance twice post listing. First, you stopped -- kind of stopped giving the break-even guidance for Instamart business. And now it seems your contribution margin breakdown time lines have also been changed from 3Q FY '26 to it goes up to 1Q FY '27. I mean, are you guys feeling the pressures of the competitive intensity is significantly higher? And that is why currently, there is some decent amount of uncertainty in your Instamart business per say?

Yes. See, I think as we kind of go in the overall deployment of our store expansion and the network we have seen competitive pressure continuing to increase, not only from the existing players, but also there are a set of new players who are entering the market. So our guidance, while we do have maintained that 3 to 5 quarters, this gives us a certain amount of flexibility to invest behind growth. especially in the geographical expansion that we have done, we do believe that there is a certain amount of customer addition that continues to be supported. If you've seen our numbers, just in the last quarter, we've added more users as compared to the last 6 quarters, like we added 2.8 million MTU. So there is a certain amount of growth investment that is required in an accelerated growth category. And we want to, therefore, have the flexibility to be able to deploy some come back into growth. And that is why the reason for the 3 to 5 quarters margin guidance. Having said that, the peak of the contribution margin investment is behind us. As you've seen, our net worth has expanded basically rapidly over the H2 of last financial year, which means there is a certain amount of underutilization of the cost that is sitting into our P&L which will start decreasing quarter-on-quarter from here on. So you should start expecting to --- that our CM will improve on a quarterly basis from here on.

But how confident are you to break even on the contribution margin level by 1Q FY'27 [ late is ]? Will -- is there any positive -- I mean, just -- I'm just trying to get [indiscernible] because of the frequent changes that are happening.

So there are not any frequent changes. It's -- we had not mentioned about December quarter. As I said, we are seeking flexibility to -- over 2 more quarters. It could be -- it could happen in December. It could happen in the June quarter or the next calendar year. We do have a certain kind of plan for us to be able to achieve that. If you see most of the investment that have happened, a large part of it is in the underutilization of the [ net worth ]. A lot of our stores are currently less than 3 months old, stores typically take anywhere between 6 to 12 months to hit 1,000 OPD number, which basically gets us to breakeven and the cash losses start reducing in those stores. We have also invested in a certain amount of customer incentives, which is led slightly by competitive pressure, but also by the overall size of the customer addition that we have done in the previous quarter. We are very confident about our -- on the trajectory itself.

Okay. And just the last one on your fixed cost in the Instamart business. The fixed costs have been consistently higher than your -- the other listed player. Now your scale is decently smaller than the other player. But still, those costs remain significantly high for you. I mean, is there any trajectory for -- to get control over this cost? I presume this is mainly because of performance and brand marketing. But at some point of time, this is the line item that we had to address to -- if you were to breakeven at an EBITDA level. So any sense of how -- what efforts are -- you will be putting into to control this cost?

See, if you see the overall deployment, a large part of below CM costs are into performance marketing and brand marketing. As I mentioned, we've added more users than we've added in the 6 cumulative quarters before the previous quarter. So there is the heightened level of investment which at some point in the future, we do expect it to also start reducing. At the same time, we believe that if we are going to add as many users, it's the right investment to also be making in the business in a phase when it is a very early stage of the overall journey itself. So there are definitely market estimates that suggest that in the next 3 to 4 years, the e-commerce industry itself could be anywhere between 5 to 6x the current size. So that gives us the opportunity to continue building and into the right -- making the right kind of growth investments. So -- but you should expect a lot of operating leverage because some of it is discretionary. We do expect to modulate it depending on how we see, as I had mentioned, in the recent past, we have seen some amount of high competitive reasons. And therefore, the customer acquisition costs were higher. Now at any point in time, if it reduces, you will immediately see that benefit falling into the below the CM line. Just maybe I can reiterate on a structural basis, we don't see any reason for us -- for you to believe that we have any fixed cost. Even in the Food Delivery business, you may have observed that we have delivered close to 80 basis points of operating leverage in the previous financial year. We have largely maintained our absolute fixed cost below CM at the same level over the last 4 quarters. So our ability to be able to maintain the fixed cost has already been demonstrated in other businesses that we operate and therefore, pretty high confidence on our ability to also manage it in the Instamart business.

Got it, Rahul. Just a last one, if I squeeze in. So this Max -- so you mentioned about Maxxsaver launch. And so just wanted to get a sense like the AOV for these customers are definitely higher. But what about the ordering frequencies? Is there any impact because customers bundle up their purchases in one order, and is it possible that these customers will -- do not come to the platform on a frequent basis? I'm just trying to get a sense of how this business works.

It's a bit early, honestly. I mean, we have not had a long time to see that what is the complete impact of it. The right to look at these impacts is over a longer period of time, but they get used to Maxxsaver and other ways of essentially buying. As of now, it -- this gives us the confidence that the spend per customer is actually going up based on the early rate. But as I said, it's early. We don't want to comment until at least we have a quarter worth of spend and usability from the consumer side. it will be irresponsible for us to stock any kind of long-term consumer behavior before a quarter.

We'll take our next question from the line of Sachin from Bank of America.

I have 3 questions. The first question is on competition in that e-commerce space. Clearly, your comments do indicate that losses should go down from these levels. And there are 2 parts to that, right? One is store expansion, which clearly there is a visibility you guys are not adding. But does this also imply that competition should also go down? Or what are your general thoughts on competition out here?

Yes. No, on the store expansion, the -- us guiding that the acceleration won't be the similar to the previous quarter, is more on the network design choices that we have. We believe that we have the necessary footprint both on the hyper local level as well as from a geographical coverage perspective to be able to add significantly more business with the existing store network. We will continue to densify. Having said that, we will continue to densify especially in the Tier 1 towns where typically, when a store hits between 2,000 to 2,500 at, we basically break it into 2. So that expansion, we will continue to do.

Okay. And Rahul, on competition, is that intensifying? Is it stable? Is it going down?

I think it is similar. I think from the existing e-commerce players, we haven't seen any magnitude of going upward down in the recent past. At the same time, there is the expectation of newer set of competition coming in, but enough is not known yet to be able to give you specific guidance on that.

A fair point. Second question, is there a major difference in terms of running a 1P model and 3P model in terms of unit economics? And does management have a focus to become an IOC at some point in the future?

So I'll take that. So we've done the math. I think from an overall economic standpoint, we do believe that the magnitude of difference can't be more than 30 basis points or 30 to 35 basis points. But at the same time, it comes on the back of also inventory holding in your balance sheet and therefore, the impact on the working capital. So it's a choice to be made on the commercial model. I think it does provide a little bit more flexibility. I think that's a fair point. But at the same time, the commercials don't necessarily justify for you to make any inorganic way to achieve -- to get there. So we will be open to the idea. I think there are obviously the regulatory framework as well as our own domestic ownership. It continues to go up since our listing. And at some point in the future when we believe that is the right time, we may also want to consider it. But there is no plan in the near future. As I said, commercials also don't have a screaming reason for us to do it.

Okay. And last question is on the market share at quick commerce. There is a narrative which is going around that Swiggy is losing market share to the 2 other players in the market, basis the growth rates and others which are there in public domain. So just wanted to understand how does management look at market share in quick commerce Is it important for a pan-India basis? Or is the focus, let's say, in specific areas where Swiggy wants to be a dominant player in that market?

Harsha here. Thanks for the question. Firstly, I think it's difficult to estimate market share accurately as the comparability of GOV has been limited because of some nonstandard definitions. As -- and our has now provided NOV, which we hope will be a much better barometer and a real measure of consumer spend on the platform. But as we think about, let's say, the next few quarters, I think there are a few things that we're excited about. First one is, let's say, thanks to a lot of the work that we've been doing on Maxxsaver and the assortment addition strategy that we've been talking about for a while. We do see the AMVs going up healthily. Second thing is, even though we have acquired so many users in the last quarter that Rahul was talking about, we're very excited about the quality of the acquisition and the cohorts and how they're playing out. And this was asked even earlier, there are going to be some modulation in investments depending on which players we're talking about. So all these things together make us feel like we're going to -- we're feeling good about the relative position as we play it out in the market over the next few quarters. [indiscernible] specific question on if you look at focused geographies, et cetera, of course, that is something that we do look at more closely. We constantly evaluate the markets where we can build a stronger right to win to generate better profit pools going forward.

Okay. And sir, last question from my side. I mean in 1 of the earlier questions and the question was asked in terms of any target in terms of further dark stores. There was no specific number being given. How should we look at it? Is it because one of your listed player is obviously saying 2,000-odd stores. And I do understand it may not be an apples-to-apples comparison because you guys do have Megapods and so on and so forth. So any framework we should look in terms of understanding in terms of how one could think about the presence of Swiggy versus presence of other competitors on a pan-India basis from a dark store network perspective?

Sure, Sachin, I can take that. I think one thing you have to be rest assured is that in terms of the customer experience metrics, we want to deliver the best. So whether it is in the Tier 1 towns or the newer geographies that we've entered, there is a certain network footprint that we have established, which helps us to deliver the best customer experience metrics. So from here on, once the network is already laid out, we do believe that the store expansion should be a derivative of growth and not the other way around, which was either to the reason for us to have expanded so rapidly. So you shouldn't expect a certain amount of gradation that's going to happen in terms of store additions. The reason we want to also keep a little bit of agility here is we don't know how quickly the market will continue to accelerate, right? So our decision to open a store and have it live is 60 days. And therefore, we do want to maintain the flexibility without having to necessarily guide to a certain number. I think in the initial phase, the expansion was necessary. But from here on, I think growth is going to drive our overall densification as well as establishing the newer footprint.

We'll take the next question from the line of Vijit Jain from Citi.

My first question is on the food delivery business, right? For Bolt, can you comment on for mature food users, users who have been on your platform for a while, have you seen any impact on frequency since you launched Bolt? And yes, and I'll just follow up with the next question on q-commerce later.

We'll -- so your question is around whether the existing users are increasing frequency because of Bolt?

Yes. I mean just the sense that faster delivery, does it increase use case in that sense for existing users as well?

No, absolutely. I think not just Bolt, but we see consistently in our data that whenever the deliveries are faster, people tend to convert more at that particular session. So that holds linearly on the platform. And Bolt is obviously at a 10-minute range, the fastest of the options we have. So we do see that incrementality.

Got it, Rohit. My question on quick commerce is, first, the NOV GOV gap in quick commerce that you highlighted here went from 85% to 76% in 2 quarters. And I know you've commented in the letter that about 250 bps impact on contribution came from discounts. So in general, would you say that 1/3 of the discounts are being borne by you in this and the rest is being borne by credit card and other partners? Is that how I should look at it?

No, see, overall, the NOV is not just a factor of also our expanding selection, right? So as the share of overall non-grocery increases you should expect that there will be a higher margin that is currently -- the other categories operate on. So it's the factor of the mix that we have as well as some of the customer incentives that we have to do for especially new users who come to the platform where there could be some amount of say, free deliveries to build habit that we continue to provide to them.

Got it. And Rahul, my next question is on the performance marketing spend that you were talking about earlier. Now how much of the spend that have gone up in the last 2 quarters as a consequence of increasing cost per impression and those kinds of things versus how you've accelerated your efforts towards reaching more people? And I guess my question is because at some point of time, if you see MTU's growth slowing somewhat because industries capturing all the low-hanging fruit. Will the performance marketing spend disproportionately go down?

Yes. I think in the near term, it did get impacted, a, by the size of the user acquisition that we have done. As you may have seen, we have added more users compared to the previous 6 quarters cumulatively. So there's a certain amount of absolute increase that we have had in the previous quarter. At the same time, because of competitive reasons, the customer cost also went up. We started to see some signs of that coming down. So in the current quarter, we are seeing better efficiencies on the customer acquisition side. And if there is normalcy that will return, I think we should expect some bit of efficiencies there. In terms of the absolute spending, I think it's going to be a factor of the market growth. It's very hard to guess that how much of this growth will continue, whether it will accelerate or there will be some bit of bumps along the way. So I think we are going to modulate it on a near-time basis and make those appropriate decisions.

Got it. And my last question, just -- so your cash burn, obviously, in this quarter is [ INR 10 billion ] thereabout in terms of operating cash burn. And you've mentioned your cash balance as well. So in terms of PAT ratio, how should one think about your cash burn run rate that you're comfortable with given this cash balance?

So yes, 2 things, right? One is if you look at the trajectory of our Food Delivery business, it is now run rating at a close to INR 1,000 crores EBITDA. So that is a cash cow that we continue to want to build on. At the same time, quick commerce, there is a certain amount of investment outlay that we have outlined. What we are guiding is that we believe that the peak of the investment should be behind us, especially as we ramp up on our operating efficiencies on -- as the network density and the utilization increases, we should see that starting to come up. Currently, we have a very strong balance sheet, as you see, INR 6,700 crores and the cash, our Food Delivery business and the Dineout business also turning profitable, which continue to accrue to the treasury balance. So yes, feeling pretty good about the strength of the balance sheet.

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

First, on the Food Delivery business. So there are a lot of discretionary companies which are talking about a slowdown in general in the urban market. So does that worry you from -- so this quarter has been good for you from a growth perspective, but does that worry as you head into [ FY ] '26?

This is Rohit. I can take that. With the macro is too volatile products to talk about or get a clear read on the impact since there are multiple moving parts, including recent geopolitical changes which are happening, right? Overall, if I disregard that, we haven't seen as much of a slowdown has been talked about. We've always spoken about the 18% to 22% kind of year-on-year growth guidance, and we are towards the lower end of that range. This business, there will be some months or quarters above or below as would be the case for any discretion category. Having said that, I do recognize that as a category, we need to innovate more to grow about 20% and we are trying to see -- seed multiple different innovations to see what really sticks to the consumer. So for example, Bolt has one certain speed. There is enough work happening in value, and I think more will happen there and differentiation, for example, with One BLCK. So again, is the category right now, from our perspective, trending towards the lower end of the guidance, that's correct. But I think that's the rough zone that we have seen. We are -- I continue to be a very, very strong believer in the long-term potential of the category, given the penetration levels, et cetera. But that has to play out as it -- and that will be palyed-out by not just by the market but also our efforts towards innovation and growth there.

So Rohit, basically, what you are saying is 18% to 22% is the broad bracket. And at this point of time, 18% is something you think the category or the segment can grow in F '26. Is that fair?

In fact last quarter, we came in at 17.6% GOV growth. So it is towards -- as I said, towards the lower end of that growth. I think the one thing which frankly is very hard to say is where the macro is also given the geopolitical situation here.

Sure. I understand. On the adjusted food margin, so there is a steady margin expansion over, let's say, actually, over the last 8 quarters. as we head into F '26, what should we be expecting, let's say, on a full year basis in F '26?

I'll take that. So I think, we don't give specific guidance in terms of what will be the incremental EBITDA that we will gain. At the same time, you may have observed that we have added close to 80 basis points on operating leverage here, which you should continue to expect. We have been able to keep a very close handle on the overall fixed cost into the business and largely keeping it flat while the business has grown over the previous year. So there is an amount of operating leverage. At the same time, contribution margin, there is an expansion that we expect by another 100 to 150 basis points to hit to our steady state EBITDA guidance. So you should expect the trajectory to continue. At the same time, there could be quarters where they could be up and down. and there could be a certain amount of investment that we may make for growth. But the -- largely, the trajectory on our upward one should continue over a full year basis.

Got it, Rahul. And moving to quick commerce, your AOV, let's say, moderated slightly on a quarter-on-quarter basis very slightly. But I would -- and there is, of course, a seasonality between the third and fourth quarter, but I would have thought at the time when you have expanded the dark stores middle Megapods and also improve the assortment. What -- I would have imagined that AOVs could have actually -- could have actually moved up given that your competitor still has -- is sitting on a higher AOV. How do you think about this?

Sure. I think it's an important KPI and we have also are holding us accountable to this KPIs. We have continued to guide that we will be doing double-digit. If you have observed that we have now upped this guidance. We expect that over the coming year, we will be able to deliver high teens growth on the AOV. So feel very comfortable about the trajectory. I think it was also a factor of the overall assortment that we had, the share of the larger basket more recently, which the Maxxsaver that we have launched. So there are most of factors that are going to help us be able to deliver on the overall guidance that we are giving, which is a high-teens growth from here on.

And I think the second part of the question, which was on acquiring new customers, and that's still leading to a higher AOV. I think Harsha essentially mentioned about good quality users leading to a better quality business in the future as well. So what we have done, and we have been consistently doing over the last 2 quarters is to make sure when we acquire customers, we acquire customers with the right basics in mind. And that is the reason why even though the -- sometimes the sequence is low, we have kept our AOV as a very important guardrail in the way that we have been acquiring customers and also repeating [indiscernible] them with us. So the reason why we have not followed that trend, and this is only exception to the new customer trade because we are acquiring customers heavily and repeating them far early than earlier.

Got it. And the last bit is on quick commerce growth. So there has been an acceleration, meaningful acceleration through the course of the year in terms of even Y-o-Y growth also. The exit number, of course, you have, let's say, doubled GOV. How do you think about FY '26 because the investments on the dark store side will be lesser as you alluded to, whereas the competition is still adding stores. So I don't know how much of that will come in the existing cities versus new cities densification, et cetera. But -- so 2 parts. One is on your growth. And the second which is by not adding stores and matching the competition in a way. Does that mean that your growth can actually then therefore trail, let's say, the overall industry or the -- or let's say, the other 2 players?

Harsha here. I think for us, the growth most of these businesses for us is obviously a combination of MTU and ANV. And we continue to have a very competitive view on both of these. Just discuss the ANV part itself. And as we've mentioned, I think for the competitive position we want, we feel good about the coverage we have for the MTUs that we need. So in terms of an overall growth overall, the trajectory in the MTUs, the quality of the cohorts as well as a push on the ANV's give us, pretty good confidence about the overall market position.

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

Just a couple of questions. One question is on -- given that all the players have been given pretty chunky discounts to the consumers. How difficult will it be for you guys to sort of wean away the consumer from discounting and still retain them? Maybe you retain them, but the kind of spends which they are currently doing?

Yes. So okay. So the way to think about the business is, the incentives that you give to the consumer are trials, basically on what they want to experience as an end consumer. So the program that we have is very oriented towards making sure that they transact x number of times. We give a specific value prop to the consumer that we believe it's sticky enough for them to come back to us. If you look at our retention numbers all over the last few quarters, upping up the value proposition is leading to customers sticking with us for a higher frequency as well. So the way we are looking at it is incentives are for trials, incentives are for making sure that the experience our value prop a lot more. Once that is done, we see a lot more stickiness in spite of those incentives actually going away. It's a very tried and tested way that we have followed, and we believe that it will essentially open. We are -- and we see that in higher retention numbers as well.

If I can just sort of add a little bit on that as well, see the higher spend which you -- records, which you disclosed, and that is coming, again at a time when the discounting has sort of moved up, right? So at some point in time, I would presume that the discounting would have to sort of come down? Or do you think that these discounting levels are here to stay? And that means that the spend will sort of -- kind of remain at these levels?

Yes. See, the -- okay, the way to think about our acquisition as well is that -- Okay. There are various cohorts in our businesses as well, okay? There are mature cohorts, there are cohorts which are new. And there are cohorts which have essentially tried our platform as well. Whenever a cohort becomes mature, they don't actually need any kind of incentive for them to be operating on our platform, okay? And that we have seen consistently, the retention rate, the repeat rate keeps on going up without any incentive at all, okay? So the way to think about it is that it's -- the incentives are very focused on a specific kind of cohort to make sure that they keep on transacting as they used to the platform. And once they get used to the platform, it doesn't require any kind of incentive to essentially make it up as well. And that is something that we have seen in our retention numbers as well. Over multiple quarters, the retention have essentially gone up, and we see that essentially going up again and again as well. So if you look at the shareholder letter, point #6 are that specifically thinks about our retention rate over the various quarters of acquisition of the end consumer. It has always been essentially early going up. The reason of that is because when the consumers are actually getting mature, they're getting used to the platform organically without any incentive. And we see that keep on happening again and again, the heightened incentive is just to make sure that there are a lot of new consumers that we are acquiring, we make sure that they get used to this platform faster.

And what would be the time line for a user to say, go from a new to a more mature user at which time they don't require the incentives to keep transacting?

So it varies. We don't give specific guidance, and it's a very competitive information that we don't want to share. It varies based on which geography that we are speaking about. But it is a very minimal number of transaction that allows a consumer to believe that they want to be with this platform or not. Beyond that, specific number of transactions, it really doesn't matter. They are already -- are they going to be your user or not. So that's the way we essentially look at it. But that specific information is something that we would not like to share because it is competitive in nature.

Got it. Just last question. You guys mentioned new competition, which was alluded by your peers as well. So end of the day, how many dark stores in particular area can be [indiscernible], right? There are already 3, there are potentially 2 more. So how do we think about how many players can -- at the top 10 cities, which is where most of the business is coming from currently, can potentially have in a particular locality?

I think as Rahul mentioned, we are still maybe 20%, 30% done when you like look at the overall scheme of the market, I feel it's too early to already be clear [indiscernible] about how many stores and how many companies can or I think it's a rapidly evolving market. So I don't think you have a very pointed view on this.

And if you look at the -- I mean, the general market growth that we are seeing, and the market penetration, I don't think we are facing a level at which it looks like that there will be growth challenges for anyone.

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

My first question is on Instamart growth. So for FY '26, you're essentially saying that you'll be more greater in terms of the store additions. So despite being more graded in terms of store addition, can we expect the GOVs in Instamart in FY '26 could potentially double given the exit run rate of stores you have and 40% odd MtU growth sequentially in this quarter?

Yes, absolutely. I think we can -- what we can look at is an acceleration of growth based on 2 fundamental number of consumers that we have acquired and the AOV movement that we have seen a [ per SME ] transaction well. We believe that, that combination would allow us to keep on growing at a significant higher rate as we have seen essentially earlier as well.

Sure, Amitesh. And this MTU growth is 40% on a Q-o-Q basis. However, that has not materialized in the GOV growth. So I'm just assuming this may be a timing mismatch, timing lag wherein some of these users might have been acquired or stores would have been added to towards the end. And the GOV growth proportionate will actually get flipped into subsequent quarter. Is that the right way of inferring this data point?

See, obviously, our MPU growth is essentially higher than our GOV and OPD growth. The way to look at it is that early consumers, be it whatever quarter, whatever time that you acquire, will be spending less in that specific quarter. It's a mix impact. Cohort wise, if you look at it, the cohort numbers on both GOV per customer and OPD customer, it actually remains the same. It's a mix impact that will get mentally covered as soon as that mix gets [indiscernible] corrected.

Got it. And second question to Rahul, on Instamart margins. So if I understand your earlier response right you're basically saying that contribution breakeven can still happen in December '25, and you're just keeping some flexibility for growth investments when you essentially mentioned 3 to 5 quarters. So this may not necessarily be construed as a delay in terms of your contribution breakeven guidance. Is that a correct interpretation? [Technical Difficulty]

Operator, Are we on the call?

Yes.

Would you join Sudheer?

Mr. Guntupalli, you're there on the call, right?

Yes. Can you hear me now?

Yes, we can hear you.

I don't know how much you heard, but I'll repeat the question. So if I understand your earlier response right, you're basically saying contribution breakeven can still happen in December '25 quarter. And you are just keeping some flexibility for both investments when you say 3 to 5 quarters. So this may not necessarily be construed as a delay in terms of your profitability guidance, right? Is that understanding correct?

So yes, I think as I had mentioned that there are factors which are within our control and some factors which are beyond our control, right? So I think us being able to take this flexibility is more to take into factors which are outside our control versus within our control.

Understood. Fair enough. And last question is to Rohit. In food delivery, so I think last quarter when we met in the call also, we discussed that December and Jan would probably be the low point or lowest point in terms of demand for Food Delivery, and we were expecting that to improve on a month-on-month basis, in February and then subsequently in March. So did the trajectory play out that way, if we just keep aside the recent geopolitical issues and all?

Yes. I think we did see play out that way, where February and March were stronger than January. Also remember, this is -- this has of a February, which was 28 months. So there is that effect.

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

So my first question is with regards to Food Delivery, right? So you have again seem to gain a little bit of market share. So any thoughts on what you're kind of doing right here? And I mean, do you really think that market share gains are sustainable beyond this quarter as well?

Look, I'll not want to take to comment on market share per se because it's very hard to define what we are treating in the market here. But in terms of general growth, I think we have already spoken about it in the call. We continue to believe that the platform is very strong. I think we have all the core parts of the platform, very solid operating in across cities. So there is -- there are hardly zones of cities where we don't feel that operation or supply or things are not in a very good place. I mean teams have been stable, the teams -- most of our leadership is now significant vintage, right, in the Food Delivery space, understand the category well. So those are fundamental basics which are operating for us, right? On top of that, what I do believe is that in a category like this innovation and trial must continue. And you've seen that coming through over last year, including some which have worked, some which have not worked, that's fine. I think we'll continue to operate in that zone where the [indiscernible], the platform, the team continue to be stable. On top of that, we have Bolt and other things, and we'll keep trying. I think that's the zone we are operating and whether if that leads to higher growth in category, I think we'll take it any day, but that's not how we operate towards on a daily basis, I think here. And obviously, if you look at margin expansion, I think that's a very important variable. I think we'll continue to focus on keeping a fair balance between growth and continuing to expand margins over time. The quarter where we will see some [indiscernible] between the both, either could be because of wage inflation or kicks into a particular quarter or the seasonality where you have to spend more on the delivery network to keep the fleet there. But those are very known sort of variables in the category.

Abhishek, Harsha here. I'd like to build on top also, I think, over the last couple of years, thanks to the team there first, like we've stabilized a lot of our operations like our account management is on an all-time high. But more importantly, I think what we are -- so cautiously excited about is the innovation engine firing. I think across multiple parts, if you think about value, we've constantly throwing up in front of the consumer to see if that catches their imagination. For the experience side, we've launched BLCK, for SPE, we've launched Bolt. So I think we're feeling good about like the input firing, and we hope some of these materialize even more in the coming years.

Understood. Understood. Now, if I look at contribution margin level. So beyond now -- so I'm getting you would also want to achieve a 4% to 5% kind of adjusted EBITDA margin as a proportion of GOV food, right? But when I see your adjusted EBITDA margin improvement in this quarter. It is broadly in line with the contribution margin improvement, which I don't think should be the case, given you should be getting some scale benefits. So why has that happened in Food? And what is the outlook on this going forward?

Yes. So Abhishek, if you look on a full year basis, I think we have added 80 basis points of the operating leverage. So among within quarters, there could be certain variation. But overall, if you look at on a full year basis, there has been significant operating leverage that we have accrued. We are also hoping that this will continue in the future. We will continue to accrue a lot more operating leverage in the future also.

Understood. Sir, I was just trying to get to a point that your competitor actually had mentioned that there were some problems in getting the delivery [ fleet ] in this quarter, especially in Food Delivery. So what was that something you also kind of faced? I mean there was some paucity of delivery drivers?

Maybe let me take this because, look -- the correct thing for me to say that we haven't seen anything unusual, right, in the last quarter. There are parts of the quarter where, for example, during Holi where there is a delivery fleet which comes under some pressure for a few days. That -- but that happens every year. That's not -- something new. So at least in our network, we haven't seen anything unusual player over the last quarter.

Just one question, and then you can give me on the queue. So in terms of quick commerce, right, you have a contribution margin, which is gone to minus 5.6%. And that I believe that you've already reached 100 cities, right? So in terms of outlook from now, do you really see city expansion or something you have to do beyond the 100 cities?

No. I think as we have essentially mentioned in the shareholder letter as well, we don't see expansion in a number of cities as the typical way of growing, we see deepening in those cities, acquiring more customers after the network as end those cities as the way to go essentially forward as well. So yes, so in terms of the cities that we are essentially going, we'll be at the same or similar kind of number, whatever stores that we'll be adding will be in those cities and effectively deepening the network there. And that's the strategy that we are actually taking forward.

Just on your CapEx requirements per store addition will actually keep going down, right, even on a per store addition?

The CapEx requirement per store addition will not essentially go down because effectively, the cost associated essentially remains the same, range bound to around INR 70 to INR 80 lakhs. We don't see that essentially going on. Of course, utilization of the stores that we have added will essentially go up in the subsequent quarters, and that should be factored in when we are looking at contribution margin in the subsequent quarters as well.

I was not meaning just for the store, I was saying that there is an associated cost that you are adding warehouses and all when you're adding a new city, right? So if that is no longer required, therefore, those costs ...

Yes. That's correct. That's it. That's absolutely.

And just one last question on out-of-home consumption, you have actually turned around and you have shown profitability. So what is the outlook here in terms of growth going ahead? And where can this profitability number go? Those are all my questions.

Sure. So see -- you've seen since the acquisition over the last couple of years, we have seen a pretty dramatic change in the trajectory of both profitability as well as growth. We do expect that this business at a steady state, again, can deliver in the [ ZIP code ] of 4% positive EBITDA for us. And we expect the growth trajectory to continue. There are some interesting events businesses, et cetera [indiscernible] those that we have also launched, which help our restaurant partners to get more traffic especially and create a lot more demand during the event days. So we are seeing good traction. We're also continuing to invest in providing them solutions outside the core offerings. And therefore, that will also, over time, aid into both growth as well as profitability.

Understood I just want to add to this as Rahul said is on this category, we continue to index more on investing for growth because it's very early days for the category. And having broken even, I think we'll modulate to the 4%, 5%, the Rahul pointed over a period of time. But very exciting. I think the way we are -- I think this is a category which -- this is an acquisition which we did 2, 2.5 years buyback and the business has grown manifold from there, both in terms of scale and profitability. So as we have good success story for us in terms of acquiring a very good asset and then building on to it in a solid way.

[Operator Instructions] We'll take our next question from the line of Aditya Suresh from Macquarie.

I just wanted to double click on your responses in Question 7. So is there any implicit market share assumption in your comment -- sorry market structure assumption in your comments?

Sorry, can you repeat the question, like what is the question?

Okay. So just on quick commerce and your comments where you speak about in -- the path towards contribution breakeven, is there an implicit market structure assumption? 2 players, 5 players, 7 players.

No, no, no, there is no such implicit assumptions in these.

We'll take our next question from the line of Nikhil Choudhary from Nuvama.

Just one clarity on your comment regarding but the connect between MTU growth and GOV growth where you highlighted that by this quarter, GOV is driven by new user additions, while you have seen slowdown in older users. Have you seen this kind of seasonality before? And why you think this is not a user churn because of higher competitive intensity?

So Harsha here, we keep closely watching our metrics overall. Firstly, as Rahul mentioned, is unprecedented acquisition win for us because for the quick commerce business, each business is different. This is the sum of 6 quarters of MTU growth for us that has happened in the last quarter. So that end it is unprecedented. And as we've already mentioned, we're constantly looking at the quality of the overall cohort and the retention of our mature users. We don't see the impact of intensity showing up actually on the retention of our user.

So just to clarify, every cohort is operating in a similar way and better compared to what we were essentially earlier. So just to get the only delta that you see in any of the aspect is just a delta on the mix. So, yes, our matured customers are retaining and spending in the earlier way or better and which is the way that we want to grow our business as well.

Ladies and gentlemen, due to time constraints, we'll take that as the last question for today. On behalf of Swiggy Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.