Swiggy's Strategic Shift: Unlisted Shares Dip, But Brokerages Eye a Bright, Profitable Future

In a surprising twist, unlisted shares of food delivery and quick commerce giant Swiggy have experienced a slight dip, even as leading financial powerhouses like Jefferies and Citi express strong confidence in the company's strategic trajectory. This fascinating dichotomy highlights a market in flux, where short-term fluctuations contrast sharply with a long-term vision of profitability and growth, driven by key strategic maneuvers.

Brokerage firm Jefferies has taken a particularly bullish stance, initiating coverage on Swiggy with a resounding 'Buy' rating.

Their analysis projects a remarkable 70% upside for the unlisted shares, setting a target price of Rs 400. This optimistic outlook is rooted in a robust valuation of Swiggy at approximately $12 billion, with the firm anticipating an IPO valuation in the range of $12-13 billion. Citi has echoed this positive sentiment, underscoring the market's growing recognition of Swiggy's evolving business model.

Central to this renewed optimism are two pivotal strategic decisions.

First, Swiggy's move to divest its stake in Rapido, a bike-taxi and auto-rickshaw aggregator, is seen as a prudent step towards streamlining its operations. While the stake is estimated to be worth around $30 million, the strategic importance lies in Swiggy's sharpened focus on its core food delivery and Instamart quick commerce businesses, shedding non-core assets to enhance efficiency and resource allocation.

The second, and arguably more impactful, development is the ongoing restructuring and refinement of Instamart, Swiggy's rapid grocery delivery service.

After a period of aggressive expansion and significant cash burn, Instamart is now undergoing a strategic pivot towards improved unit economics and a clear path to profitability. This shift involves optimizing delivery routes, refining inventory management, and enhancing operational efficiencies to reduce costs while maintaining its competitive 15-minute delivery promise.

Analysts commend this shift, recognizing it as a crucial step in transforming a high-growth, high-burn segment into a sustainable, profitable venture.

Swiggy's core food delivery business has already demonstrated its financial prowess, achieving profitability. This robust foundation provides a stable platform for the company, allowing it to invest strategically in the transformation of Instamart.

With the quick commerce segment showing promising signs of reduced burn and improving margins, the combined strength of these two pillars paints a compelling picture of a company nearing its profit-generating potential across its primary verticals.

While the path to a public listing is always complex, these strategic shifts are clearly positioning Swiggy as an attractive proposition for investors.

The company's proactive approach to optimizing its portfolio and honing its operational efficiency suggests a mature and disciplined management strategy. Of course, the competitive landscape, particularly with rivals like Zomato and Blinkit, remains intense, and potential regulatory risks are ever-present.

However, Swiggy's calculated moves are seen as robust responses to these challenges.

In essence, the current dip in Swiggy's unlisted shares appears to be a momentary blip against a backdrop of significant strategic strengthening. As the company continues to execute its plans for greater efficiency and profitability, particularly with the successful restructuring of Instamart and the focused divestment from Rapido, the long-term outlook, as affirmed by major brokerages, remains decidedly positive.