Swiggy Limited ($SWIGGY)

Ladies and gentlemen, good evening and welcome to the Swiggy Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Sharma from the Investor Relations team. Thank you, and over to you, sir.

Thank you, operator. Hello, everyone, and welcome to the Q4 and FY 2026 earnings conference call of Swiggy Limited. Our financial results and shareholder have been published on the exchanges and the information pack has [indiscernible] been 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 1 could be 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 process. Swiggy does not guarantee these statements and is not obliged to update them at any time. Joining us on the call today are Sriharsha Majety; MD and Group CEO; Mr. Rahul Bothra; our CFO, Rohit Kapoor, CEO of Food Marketplace; and Amitesh Jha, CEO of Instamart. This is brief [indiscernible] Q&A. Operator, you can please go ahead.

[Operator Instructions] The first question is from the line of Sachin from Bank of America.

I have 3 questions. First question is about some of the comments you guys mentioned in the shareholder letter about doubling down on differentiation. Can you help us understand 3 to 4 areas of differentiation for you guys versus competition?

Sriharsha here. [indiscernible] talk about for examples of how patients like in the category. So thanks to the question. So even in the shareholder [indiscernible] talked. I can just take the for example, with what we've done with [indiscernible] Ifyou go, in the case of eggs, you will find [indiscernible] I mean with much better quality feed for the animals that just makes a [indiscernible] about and not more freshly on last year preservatives that just significantly the dam portion of the product and the taste of the product development. So these are really some accruals in the phone canopy. But even outside that, I think there are aspirations that we the corporate category with a pipeline where we work on expanding the category very eventually some interventions we made for an assortment in plans to go well actually in the next couple of months, a host of examples out of our dossier. But the broad end are largely always looking for places of the economy. And we believe that there is an opportunity in being the platform that can democratize the aspiration and offer more and more access to consumers across the host of cadres Louis 1 group to maybe give access to make bad at quality is to our consumers, working with the brands to open up something in the triage and at of grid in the own booking category by creating [indiscernible]. So that is the broad key for us.

Got it, sir. Sir, just from what I understand the area of differentiation is product categories or SKUs which have been put on the platform versus anything on [indiscernible] others. And out there possible to show some numbers how much of a GOV or NOV right now? Are these SKUs? And why do we expect that proportion to be as a percentage of NOV in terms of differentiated offerings?

Fortunately, at this point, we will -- will be unable to share a lot of details, as we mentioned, it's still early, but we will come back over the next couple of quarters as we have more shows. Also, I'm a specific detail that I want to add as it clear this is not a strategy that is exclusively even as we mentioned in our shareholder report we will continue to serve all [indiscernible] needs of today's business but actually amplify the upgrades as opposed to see [indiscernible] to the update. Thank you.

Got it. And directly [indiscernible] can't do exact numbers, but when we directionally think about it, is it going to be 10, 20 percentage of NOV? Or is it going to be much, much higher?

So Sachin, Rahul here, I think it would be extremely high for us considering that we are trying to create a differentiation here. I think ultimately, the consumer proposition is very strong, at least early signs that we have seen with some of the levels that we have launched as well as working with some brand partners. We are seeing pretty good uptick. I think over time, what really helps propositions like this is consumer retention and frequency increase over time. And that is a largest benefit of these propositions will come. So as Sriharsha mentioned, in a couple of quarters, it will be will give you some more color in terms of how this is progressing for us. But early signs are very very encouraging.

The next question is from the line of Vijit Jain from Citi.

A couple of questions from my side. First private label with one that you spoke about, is that contribution margin [indiscernible] you in quick commerce, private label as a whole or specific brands within that? That's first question. And then just follow up with one more.

The first question, Sriharsha here, for us, as we've talked about [indiscernible] for as an attempt to actually build on the differentiated assortment and goal for us to improve stickiness and repeats and engagement on the platform. It's not from in maximizing the questions. Having said that, it is contribution [indiscernible]

Yes. I think that is the value play right -- so what we are not going to do is think of this as another commoditized player way made couple of [indiscernible] margins [indiscernible] a differentiated offering. This could be even higher value and therefore, more contribution margin. And across categories that we [indiscernible] out, it is definitely want to accrete our overall margin structure versus doing these commoditized [indiscernible].

Understood. My next question is, can you elaborate a little bit more on this commentary where you say that you've repurposed customer incentives away from direct-to-wallet subsidies -- if you can elaborate on that? And then also, I see that marketing spend below contribution line have started to trickle down this quarter. Now I know 1Q is seasonally strong. Typically, you see higher NPU additions in 1Q. So how should one think about both how you're tracking so far in 1Q on MTU additions in quick commerce and the marketing spend below CM? And then if you can explain that commentary on repurpose customer inventive.

Its Amitesh here, as we had said in our last earnings call as well, there are material ray in which we will be reaching our number 1 is purpose of the incentives that we give to the end on the bullet. We rationalized that we don't reduce it. And in the way that it happens is that it allows for better retention for the end consumer as well. I know that's the process that we are taking. It also means a lot of time, what will happen is a high frequency customer to retain better and which is the process that we have we are initially taken. The second question was on on the marketing spend.

Marketing expense below CM and the MPU additions, how you're tracking in 1Q?

Yes. See, there are was okay, the marketing spend, what we are doing is commensurate to the growth that we are specially looking for. The way we look at our MTU is that there is a lot of consumer base that we have that we need to focus more on retention and in [indiscernible] the platform. and which is what we have been trying to do over the last couple of quarters and which we will continue to do over the next couple of quarters as well. That said, that is a definite marketing spend that will keep -- that we will keep on going on the new consumer base. That new consumer base will apically keep on increasing. But yes, at the same time, our MDU will still pay light headwind on the base that are low AOV, low frequency and which we officially continue.

I see. And sorry, just so 1Q, will you -- does that mean MD additions might slow? Is that what you said? Sorry, isn't quite follow that part, if you can clarify?

No, we can't daily give an idea on what will be the forward-looking section on this on this somewhere. But as a strategy, it has not changed in the way that we [indiscernible]

Understood. And one last question from my side. You have a medium-term time here now of [ INR 1 trillion ] in quick commerce. And I think you said something to the effect of that you'll get to INR 500 billion-odd double the current pace, without adding too many stores. So in general, is the INR 500 million to INR 1 trillion journey, how will that come about? Is that geographic expansion? -- on the cards beyond F '27, is that how one should read those colin conjunction?

It's Rahul here. I think what we have really to the medium-term guidance here is in terms of the size of the business that we have built and where is going. So everything we take conservative estimates of say 45% to 50% in this business, we can potentially get to the INR 1 lakh crores in between 2.5 to 5 years, right, depending on how the overall market growth really pays out. So for us, this is really establishing the size of the price that we are going after and also establishing the overall contribution margin pool and the EBITDA margin for that we and clearly the [indiscernible] Along with the reiteration of our guidance of having achieved emission margin or our guidance [indiscernible] of margin in the current quarter. and you would have moved it actively by close to 5.5 percentage points over the last year is, right? And perhaps we are the only one in the industry, we are moving in such a short time. So for us, these are the choices which have added up. Of course, those is important. And we don't see the rest add stores necessarily over at least the next few quarters and be the in the current utilization that we have. But outside of this, geographical expansion as well as store expansion will absolutely be critical for [indiscernible] into those.

Sriharsha here, just to build on this answer a little bit more, we've also given this ambition for what we want in the medium term to also help explain any decisions that we will be making because the framework that we've used in the past. It was important for us to get to this [indiscernible] milestone in a quick enough time frame for us to be able to feel the chances of the ambition becoming stronger. And every decision that we take financially investment-wise is all going to be just by does it get us closer to this ambition or further from this ambition.

Next question is from line of Jignanshu Gor from Bernstein.

Sorry, my question is on Food Delivery. My first question. So we've had a phenomenal growth in Food Delivery. So one just clarification, all our new experiments on food delivery, whether it is trying or [indiscernible], et cetera, they are all included in the financials for Food Delivery and both growth as well as margins. Is that fair?

Rohit here. Everything that we read about, which is old night store intranet all included or for platform financials. Time is a completely different business, right? And it is that it's a very [indiscernible] evolution. That is not in a Food Delivery, that comes under the [indiscernible] duration bucket as we see.

Okay. Fair. All right. Going ahead, how do we think of the interplay between owning and Food Delivery, right? We've discussed why we needed different apps. I think that's fair. But even on Food Delivery, we have 99 store and other parts, which are creating a different brand ability or different -- addressing a different customer profile, right? So how do we think of that? And are we seeing a shift of consumers from Swiggy to [indiscernible]?

So let me please [indiscernible] answer tell you a phenomenon. [indiscernible] we know our business, we know the category. It leaders to expert the winter published is up to like 10% of population on an average [indiscernible]. And the contents of that price. And we have [indiscernible] guide to them. One is relating growth of between 20% and an EBITDA margin of [indiscernible] And the question is there is a last part of it very integral. My question is whether a models? [indiscernible] to open up that segment. Now early days, 3 PM, we are seeing [indiscernible] shoots of optimism there, it's too early to the rate deposit in mice model also evolve go along. And I know [indiscernible] seen a atonal adjust. But if you think of other industries e-commerce comes exists. There's some overlap of customers that their legislative hedge. So we don't know how it shapes up, net, but we may be in a bit better question to give that answer in order.

Okay, that's helpful. Last one small question on e-commerce. I think we added 0.5 million MPUs despite not adding stores. So what would your sort of view be on what drove this per store [indiscernible] addition?

We don't look at MDU as a growth or number 2 is an overall number that's significant, how many new customers we are essentially getting and how many customers or those are essentially retaining with us. We don't look at it as an MDU number. You should look at it as an absolute and certain on the overall base. If I was just double the on this, and I think this is an important topic. That what is your aspiration of slower growth, et cetera. If you look at the current coverage that we have across the 130 cities that we are operating, and in terms of the last mile that we operate at the speed that we operate, you find us is well distributed in these geographies, right? And we are taking to greater than 90% of the demand. So per addition from here is more and more deplication all the stores that we make when we have to do any graphical expansion. So for now, we want to get the operating leverage from additional utilization that we come through with the growth that we are in.

Next question is from the line of Aditya Soman from CLSA India.

So just 2 questions. Firstly, again, on doing some of the third-party data, we are seeing that monthly active users are almost as much as 1/3 of 3 of the main Swiggy app. One would that data be accurate in terms of the adoption of [indiscernible]? And second, if that's the case, then would a significant chunk of the losses in platform innovation really from trying at this point?

Rahul here. I think we don't measure really around MAU, I think for us, all the acting user is really the north star that we see. And honestly, a number of downloads or a number of app opens is just a data point. And as Rohit mentioned, it's a very early days in doing journey to be able to establish any permit there. In terms of the back of innovation, this was a quarter that we also set down a operation, the last part of the cost at in that is related to the [indiscernible] operations are getting closed.

Very clear. And then a second question on -- so right now, we are seeing a slowdown in sort of overall growth. And I see that you've made the choice between sort of growth and profitability. But in terms of going forward in view, let's say, you achieved the sort of contribution breakeven? And how do you see the path to accelerating growth? Would that mean that you would have to be more aggressive on pricing again? Or do you think the pricing right now in the market is just at a rational level?

Amitesh here, one thing that we have reiterated again again is that we are not going to take the roof of buying growth. It is something that we had really committed to on that social couple of quarter back, and we'll [indiscernible] continue to do that as well. The reason why we go to breakeven is that, obviously, it makes the P&L healthy. It increases our staying power and allows us to invest in the places where it is a lot of a much more [indiscernible] structure. At any point of time, our -- the focus that we have is to create more such kind of [indiscernible] and bring opportunities associated with it as well. The growth that we will see. So once that will happen after we reach a [indiscernible] kind of headwind that we had created because we have reached this [indiscernible] will officially go away, and that's still some more actions, which we continue to foresee happen from the next quarter.

Understand. And maybe just to follow up on that. I mean -- so would that then again mean that the losses could go up or that would be like the base level of CM that you'd operate with? I mean the question is upwards being that is it, are you making a proof of concept that you can reach CM breakeven? Or is this a sustainable level of CM and then growth becomes -- and growth will come a bit improving CM?

See, the one thing that we have committed is that -- and as we said also, is that CM is also a reflection of our staying power in this particular business. So the investment that will go and if it required to go in any area has in fact enhances that [indiscernible]. So the commitment that we had in Swiggy -- if there are revenues of growth that require investment, we will keep wondering that there any avenue of growth that dilutes without having any advantage on the business that we are with we will not do it. So buying growth, we will essentially not do, which will basically mean that we don't see a [indiscernible] happening going on.

Next question is from the line of Ankur Rudra from JPMorgan.

To the acquisition of food, I want to start there to the comments on [indiscernible]. I wanted to understand in the medium term, are you not potentially cannibalizing the main opportunity for [indiscernible] app? And so far, it doesn't seem like you're adding new [indiscernible] in your restaurants, is this potentially reducing your feet platform [indiscernible].

Sriharsha here, as Rohit already mentioned, it's still too early to figure out what is going to happen, when will it happen, et cetera. I do think that it's also important because we're not the only player there are folks who are also attempting what this business model can unlock as challenges outside the category. I think just by being able to do it early, we also probably have an opportunity of understanding what goes on. But I think it's too early to comment on what happens in the medium term. Of course, the idea is that the progress in pull forward only, it feels like something that unlocks incremental growth.

I think just to add one thing to what Sriharsha said , that if you get going and what the proposition is -- it is intended to open up a set of users who are target infrequent under foliar -- so hopefully, along the aeration is just pay out because you should also see a very net of users adopting the [indiscernible].

I mean I understand it's very early, but you're not seeing any signs of mountain from to in environment. Okay. So moving to the quick commerce, what is the double click on the million term targets at talk about pipeline going and 5% kind of margin is comping 50% to 70%? Or if you look at the kind of 3- to 4-year basis, is that number one fair to expect to what needs to happen to industry structure for this to be possible?

So as you rightly said, we are talking about the medium-term urban think of between 3 to 6 years -- and depending on how the category goes pass out how the penetration pans out, how much of are they new users and new frequencies does the car gets to. And again, the number of players that are participating. I think a lot of this is therefore not something which is clearly being a project from the data deeper today. However, the journey is very clear, that we have achieved a percentage as a certain profitability in this business. and any growth from [indiscernible] going to be good growth, right, because it's going to add to the contribution [indiscernible] profitability journey. So very hard to deepen time line to it. But as I said, anywhere between 35% to 50% can get you to the same base in between 3.5 to 5 [indiscernible]

If I could have one quick follow-up to this. In the near term given competitive active continues to go on. Are you happy to give up market share consistently in the terms of profitability?

Sriharsha here, I don't think you said anything about being compatible giving up market share. I think we have to keep making choices between growth and only to get closer to the [indiscernible] that we've talked about. [indiscernible] is fighting the short ton element in going after spending in places that will hurt us later, I think that it compromise our long-term relevance. So honestly, it is a balance that. But I don't think there will be commitment to go ahead close market share. I think it's important to build a more favorable business. But as we've mentioned, even more growth will come from executing on the clarity and positioning that we've been talking about. There was a question even on market structure. Honestly, we do not know yet how many players will be on the other side of all of this spending and overall category growth. But if anything we've learned from multiple categories like modern trade or telecom, et cetera, I think whoever got clarity earlier is the 1 that is still standing today. So we want to be clear about what our price is and keep making sure that the strategy speaks to the medium term time. Sometimes, it may have to be repayments, but I invention as [indiscernible] talked on, hopefully, with the contribution behind us in some parts of the proposition coming together. We want to get back on the growth in June and start making investment for accordingly.

Next question is from the line of Sachin from Bank of America.

I had a couple of follow-up questions, which are remaining. So just following up on that. Number one, Rahul, you did mention about focusing and targeting good growth, one of your peers is talking about more like a 60% in a week CAGR for 3 years. And Sriharsha did mention in the last question answer. It's also about maintaining market share and not giving market share. So is that fair to assume that kind of a growth we could also expect from Swiggy while the focus towards profitability continues? [Technical Difficulty]

Sorry, we're not able to hear you I ask you to repeat your answer once again.

Rahul here. If you think about short-term market share and long-term market share, even if you look at the category around today such as there's a payer who is probably 4%, 5% of contribution. We have our own guidance of getting closer to Skyros we've talked about. There are a bunch of players in the [ minus 10, minus 15% ]. So maybe only talking about market share in the next quarter probably takes away from what's going to play out over the next few years. As we don't have a stated desire to those market share. We believe that our chance is to improve long-term market share come from [indiscernible] as we've been losing profitability. Of course, crossing a big side of the sense of the CM allows us to see growth as profitability [indiscernible] and we hope that, that coupled with the proposition covered with everything we've learned over the last 3 quarters, gives us a finding and again as we invest for profitable growth.

Got it. And lastly, I mean, there has been a good amount of again, expansion, which done by some of your other peers also, when you think about expanding into, let's say, eventually Tier 2, Tier 3 cities? What are your thoughts on those lines?

Yes. So -- the reason that we'll expand to GPs is one. As we said, that there is a need for essentially a densification because we at getting that to order, we will actually do that. The second will be that, yes, there are something that we do even right now, even in the last 2 quarters as well. We look at cities that are more likely to make an impact on -- based on the kind of consumer base that we [indiscernible] have. That level of expansion will eventually happen. Those will be smaller based on the number that we have. The certain expansion that we see is expansion, expanding in existing cities where we would have left out some of the other areas. But the way to see commodities in the current report that we have there is a headroom for orders, which is good enough to sustain us for the next few quarters. Expansion will be more a need because we are already crossing those limits in only [indiscernible] geographies and which is the way that we move forward.

Next question is from the line of Gaurav Malhotra from Axis Capital.

Couple of questions. On this Shareholder letter, and I think this question was released earlier as well. You have mentioned that as you sort of contribution margin breakeven and you will possibly look to accelerate growth. So does that mean that essentially the contribution margin in breakeven because it's like the floor. And anything extra you sort of gain from there will be then reinvested back in the [indiscernible], at least in the medium term, understanding correct?

You see even last time when we were speaking about how -- where do we invest and where it is not. We are always spending an area that we believe investment is will keep on investing. And in the area where we believe that it is buying growth, we will essentially not be doing it. Medium term, we will keep it very, very calibrated things that are essentially working out, we will essentially go behind it as well. So yes, it things are working out. There is not a need for us to necessarily reinvest contribution margin gains going forward. We believe that there are areas where it will make sense to invest, we will have to speak on that. So it's hard for me to give a guidance, but the flow information remains true. And that means that, yes, if there are areas where the growth is happening without specific investment needed, we will be on that part, and we'll also increase that contribution margin.

Just one follow-up. So when you understand that it's pretty competitive, and you don't want to chase a by growth. But given that the multiple players, some of them -- some of them are larger were quite aggressive, some new guys who are becoming more aggressive, in that regard, if you were to sort of sort of see some market share, and for hypothetical is this competitive intensity sort of remains for another 3, 6, 9 months. Is there a risk that some of your users who are sort of maybe experimenting there to other platforms will basically then combining shift? And hence, to regain them will become more expensive later on?

Ultimately, as we've talked about, I think the biggest thing for us to be so is the proposition that is the only structural way to keep users engaged in it. Otherwise, we will have to go up now and again, be us, as you mentioned, there are oppose capital. And it is not clear when anyone will make to saying, I'm not going to [indiscernible] also we want to start building already [indiscernible] of them have also just be forever value-focused sales. So to play that gain that we don't have any like to-in strikes as if we were indeed like a value-focused platform, then we would say, okay, let's say was this in going right in this specific part of the market. But if that is not a stated strategy, then I don't think we can go in [indiscernible] that much. For us, we are very certain that working on our proposition is the only durable answer for the [indiscernible].

There was an improvement in NOV to GOV intecomments this quarter. How much was this related to you sort of reducing your become? How much was it there some mix because of seasonality?

Yes. So one of the factors was that we thought the moperment sometime around the 30th of January. So that's been a fun -- so roughly half of the gain in through because we stopped the not experiment. The other 10 is more structural where we've been able to offer lesser incentives to our customers until on a sequential basis grow faster.

Next question is from the line of Abhisek Banerjee, from ICICI Securities.

A couple of quick questions for me. First 10 is we had a guidance that we net EBITDA level in 4 quarters from contribution to [indiscernible] so does that still hold? And 10 more thing is in this quarter, you've spoken about the contribution margin for the month March. Now when we see contribution breaking [indiscernible] first quarter, right?

So the first question, Abhishek, I think we have decided not to pallet on when EBITDA profitability will come through as we have rightly said, that having achieved the case that we have is also good to handle a larger share of the book that is going to come through. And again, what is the right kind of growth, right? And that's where we will continue to invest in -- so I think EBITDA profit will be a choice that we've been made at a later porting time and again, depending on how the market course will play out. On the second question, yes, you're right, this is for the entire quarter and not just one.

Okay. And just trying to understand 2 things. So given you will be contribution breakeven, Beyond that, at nondirect expenses, seems like costs, et cetera, how should 1 model that going forward, especially even we are not really seeing an NPU action to the level that 1 would have kind of hope for [indiscernible] levels of customer and acquisition spends.

Yes. Our -- I mean, I'm slightly not sure what your question was why I answered in the best that I. The user acquisition is something that we will continue to do in the part of our growth engine. And obviously, 1 of the more important aspect that we look at and something that you will see coming from us going forward as well is the retention of that particular into business. But -- so yes, the MDU growth, a big chunk of that will come from the users that we acquired as we retain. As I had said, it's a test also go out of the platform. Part of that is because of competencies. And those users typically have lower frequency and lower set is something that we are also comfortable with because we want to retain more consumers who are more long term on the platform as well.

So I was trying to understand whether the overall customer acquisition spend will remain at this level also, but I kind of understand that the MT numbers that you are talking about is what the gross addition is rather than net MTU addition and probably churn rates are slightly higher. But if you can guide on the overall expenses also, that would be helpful.

We won't be able to guide on the gross persist -- I mean, the number that we have is net of both acquisitions as well as retention. The commitment that we have is that, yes, it's a growth industry, we will continue to invest on consumer base. We will continue to make sure that the efficiency of this acquisition is also better. The more and more our [indiscernible] plan, we believe those accretion numbers will go up. We are already seeing that happen even right now. You would see that the kind of investments we are making in the growth that we are seeing. We believe that titrate higher or acquisition going on the level that we want with a spend that is more efficient, will continue to happen.

Next question is from the line of Vivek Maheshwari from Jefferies India.

A few questions. First on the food delivery side you this recent increase in commercial gas prices. Do you think there could be some impact on volumes in the near term because of this issue for aggregators?

Yes. So look, I think the LPG crisis started sometime fourth week of March, right? And there was impact on the spec industry has to be reported in the bid terms of the bit of cylinder, et cetera. But to 2 things. One, we've seen a slight bit of price increase because that which the restaurant industry has taken. We can return our platform, which is on significant. So that would like probably offset some bit of the cost pressure. From our standpoint, I think we were able to Navigate is to support the response in terms of increased tics increased ability for them to adjust spread out the demand. And also, I think we are a contribution to consumer business, we will [indiscernible] restaurants, right? So both in terms of the growth as well as the protein side, we are able to navigate this in the month of March. And since then, the situation of at result as things can happen for the suppliers come better. And we -- the restaurant industry is also, like all internal group 2 finding or eating or cost of supply as well as just the supply [indiscernible].

Okay. Got it. Moving to Quick Commerce, One thing Rahul, that you mentioned about the NOV GOV and what has contributed to that increase in -- but when I look at your take rate as a percentage of NOV, that number is flat on a quarter-on-quarter basis. Why would that be the case? And sorry, to my question.

No, 30 basis points pickup if you look at our take rate, Vivek.

So that's on [indiscernible] when I look at NOV, that number is flat. It's at I think [ 19.2% ].

So as I said, there's obviously -- I don't think that we do on the consumer side and the thing that we do on the merchant side, which is a combination of the take rate. So a last part of this increase is -- has been on the newer side because we have a platform even better in tenge, they have also started to monetize on the delivery fee side. So these are the things that have impacted the [indiscernible]. And it's a structural move for us because as we have said, we are not participating some of the lower GOV orders and the consumers who are it attaches to lower market prices. So that's the storage that we have made. And as we have also written, we have half the mix of these NOV orders over the last year, which has also helped in the overall ratio increase.

I see. Got it. And lastly, while we have discussed quite a bit on the confirmation margin. But when we look at overheads in QC business, those are running at about [ INR 710 crore, INR 715 crores ], at least for the last 2 quarters. Now from here to, let's say, a journey to breakeven whenever that happens, what will be the driver for this? It's essentially going to be -- it should either be a mix of like higher take rate operating leverage? And maybe if there is some inefficiency with line item or anything that can -- then can optimize on. But this INR 700 crore plus number is still very, very high, right? That will still translate into [ INR 2,800 crore ], of full year EBITDA loss. How do you think about the journey to break even in the next few years or whenever?

We think the [indiscernible] at around INR 700 crores report. A large part of this is marketing spending. And as you're aware, today, we are seeing heightened levels of spending across various platforms, which has met that there is certain amount of inflation on the customer acquisition cost. Now we do expect and we have seen that we were in the food delivery business in the market structure matured we see significant operating leverage coming out of some of these spending days as [indiscernible] on actually have reduced our [indiscernible] spending while continuing to get user penetration. So as to be a combination of scale as well as efficiencies getting unlocked on the marketing spending side.

But that's what we have in the context of the 2 new competitors you have or the horizontals who have come into the space, this -- the market expense you could be here for a longer period, right? Is that a fair understanding, which means that this overhead line may take quite some time before starting to drift down?

It's going to do extremely hard to estimate on that, where does the market structure evolve how much competitive hesitate before it settles down. I think we have the levers to continue to extract efficiencies on the other lines and not just the marketing line. So you will see pets operating leverage now that any growth is going to deliver division, not to the [indiscernible]

Next question is from the line of Gaurav Rateria from Morgan Stanley.

My first question is I understand around the retention ratio in the Quick Commerce business for your MTUs. At the peak, we were adding 3 million consumers a quarter. Right now, we are adding 0.5 million. And our marketing spend largely would have remained intact. So it appears that the gross adds would have remained largely same and the retention ratio would have come down for existing users. Is there any metric to get a comfort on how the [indiscernible] ratio has changed in the last couple of quarters? Any repeat business percentage now at about a year back?

So 10 of the things that we have decided to do is really turn out some of these low DoD customers who have alternative platform choices are today rate getting from home service. So there's an active churn that we are seeing in that segment of the users. At the same time, the math we care about, which are the high spenders, higher frequency ones, those continuously are bikinis. So [indiscernible], we will share. I think a couple of quarters back, we had shared the GOV retention for these acquired users, and we will share that periodically going forward. But a large part of that growth reduction that you've seen is the user that we have deliberately joined out from the back half.

Okay. Fair enough. My second question is on the NOV growth, if you look at this year was very heavy lifting was done from the AOVs with all the initiatives that you took place? And maybe now price,and therefore, next year growth would be driven more from an order growth perspective, right? And the current competitive market, whatever we are seeing in the order growth in the last 2 quarters, as an example, on would kind of be the right reflection of the growth in the coming quarter as well, right? So, is it fair to say that from a next year growth perspective, where our CM targets are in mind? The order growth will be a right resection, AOVs have largely normalized. And with the current level that we are seeing is the right reflection on the growth?

Sriharsha here. I wouldn't get too much into OP growth in the last year, and there were extradite next year. As we've talked about in the letter as well, the scale is an unusual one. There are 6 players, 7 players when we have it, and we take the most in contribution over the last 4, 5 quarters. overall time from here is going to be disinclined from what we have gone through in the last 4 quarters. So I mean there are so many things that are changing that I don't think there's much value to be [indiscernible] looking at what happening in the last 3 for the context of [indiscernible]

Okay. I was [indiscernible] for next year, but I understand that you will not give a forward-looking statement. So I was just trying to understand the mix or the qualitative aspect of it, but fair enough. My last question is on the steady-state margin that you're talking about in quick commerce on a medium-term basis. And you also shared where on the utilization of the low, at 40% kind of number. So what's the right utilization rate required for you to get to that hit the steady-state margin?

No, it's a concern of the majority of the store, right? So for example, whenever a store is close to 80% to 85% capacity, we end up densifying that particular area and we open another store there. So depending on when we achieve those sales and what is the utilization of those respective stores. I think the 2 additions will continue cases that utilization typically have at around 80%, 90%.

Next question is from the line of Ashwin Mehta from Ambit Capital.

So the first question is, we talked about breakeven next quarter, which is a swing of almost 180 bps in terms of your -- now that's higher than what we have done over the last 8 quarters. So what are the big drivers for a massive swing? Would it be discount reduction? Are there other factors which are at play?

You have called out in the letter by 12 basis points was the average for this quarter. We exited the month of March [indiscernible] and this was, as we had mentioned, there was [indiscernible] that we were running on the monetization side that we have reversed. And therefore, on an exit basis, we got a better pickup. So the journey itself is more like 100 basis points versus 180 basis points. And now [indiscernible] is behind us, we are very confident of being able to [indiscernible]. Just to I think there is monetization, there's advertising, the operating leverage you see sequential volume growth continue to pick up. So these are the levers that are [indiscernible]

And Rahul, we saw at an entity level, advertising promotions fall by almost 8% gradually. Now or, say, fixed cost in the QC business have not fallen. So is it some other business where there has been the rationalization? Or is it something else?

No, I think we don't share specifically the number across the business units. But as I directionally mentioned, there are categories that are emerge requires give us more operating leverage and lesser tax on that spending.

And the last question is in terms of CapEx. So we didn't see much of an actor addition or our area so the dark store has also not gone up materially, but the CapEx is at around INR 195 crores, more or less similar over the last 2 quarters. So what are the areas where this CapEx is going?

The warehousing investment. So as we have overall increase the geographical footprint -- there are new markets where we see the need to open warehousing in hence us in also reducing our middle mile as well as serviceability to those cities. So most of these investments have been made thereafter part of the business, which again, gives us structural capability to continue growing for the future. So that -- a lot of that expense as account behind us. So as we've also mentioned that we expect the CapEx number significantly come down for the last couple of years [indiscernible]

Okay. Okay. And just one small question, what does our non-grocery share in the QC side? I think you used to disclose that earlier.

Yes. periodically disclose that to the early deals and as you are out that we expect this number to be super in the range of 30% to 40% because bond that we still want to retain the benefits of being on a high-frequency good platform. So those are the numbers in [indiscernible].

Next question is from the line of Prateek Maheshwari from HSBC Securities.

My question was more on the commerce in guidance. So as you said, the guidance is sort of INR 100 crore in NAV in probably 3 to I was just looking at -- I wanted to understand the price was in terms of the NOV user data on -- so recent for sure, volume rates to 2.8x versus what you guys were doing probably it was 30% higher. But let's say, if I think about 3.5, 6x the number of users that you would need at the current state of will be somewhere between [indiscernible] million. And if we look at the largest player in the market, their guidance is also to reach if you come out [indiscernible] some with the user base, right? So 2 questions here. One is this is what you want to imply for the position relative to the [indiscernible]. And also, how this would be resin the user additions of [indiscernible] right? -- this would take really long time considering even if the industry console 73 plans. So just wanted to understand from you on these points.

See, one of the ways to think about those is exactly the terms which you spoke about how many new users we add how do the -- how many time transact and what are the then of those business. We believe that the movement will happen, obviously, one part on the pieces. We don't believe the frequency that we are in right now. the right sequence to do essentially a medium-term planning, that we can see relist then there is a movement that we expect to happen on [indiscernible] we also drive some part of that particular growth. But as you rightly mentioned, the majority of that number bills which we come from the acquired -- now we've spoken about this number and an [indiscernible] other quarters spoke about the network cost the headwind that we have on our NP growth now is right now, specially related to removal of the consumer base that [indiscernible] very infrequently with our platform. You will see that movement happen in when that particular commitment base will be going up, where our acquisition will allow for overall number to be appreciated [indiscernible] We believe that churn will be another 2 quarters. And after that, you will see a healthy movement on our numbers.

I have a follow-up on this. So still, it seems the exploration in the quarter is bistandyou say that probably was after the [indiscernible], we'll try to do it led -- so just wanted to understand, with the guidance by going into anything or such stock, right? Because if you organic should still be private so because the target is very high [indiscernible]. So just want to on that. Second thing, just wanted to understand that have given the back store designer every geography reach 3% to 5% of contribution margins. So just -- and we could have read about breaking in EBITDA margins at 4% [indiscernible]. So have you gone are you very profitable on those back stores and even in your [indiscernible]? Those 2 questions, if you can expand on.

Absolutely, right? So top city, for example, is already operating at 3% positive CM. And under the city level, it's already making a [indiscernible] One question on the MPU, I think as I called out, this is a game addition that you have seen, which has been also driven partly by some of the changes that we have done to our position around the lower AOV users. So I think we continue to be relevant and as we discussed, right, the dentition that we are taking on the platform, we attract a certain set of users and user growth. And it is important, I think both frequency, AOV as well as the MD is going to be an important in our overall good one. So really hard to give you a specific number right now. But directly, we do want to continue to acquire a lot more users than the cones.

We'll take the last question from the line of Aditya Suresh from [indiscernible] Group.

Just one question. If I look at your cash flow statement, despite the improvement in margin in delivery, reduction loss in comes the absolute kind of negative number cash from operations remain elevated. Free cash to annualized is about negative what are your thoughts on that scale of loss?

Yes. So there are a couple of things. On CapEx, we have already said that we have seen heightened levels of investment over the last 4 to 8 quarters, which will start to moderate as we are behind on the overall rating investments that we've done. Some of the working [indiscernible] games are cyclical, and you should expect us to sequentially improve that in the upcoming year.

Thank you very much. Ladies and gentlemen, we take at the last question. On behalf of Swiggy Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.