India's Swiggy to deepen Instamart presence in existing markets as losses widen (updated)

Swiggy

Today 11:57

Swiggy to prioritise existing markets over expansion into new cities
Co expects Instamart losses to ease after September-quarter peak
Quarterly loss narrows but misses estimates; revenue beats view
Rewrites throughout with comments from analyst call
By Surbhi Misra and Aishwarya Jain
Oct 22 (Reuters) - India's Swiggy SWIG.NS plans to deepen the presence of its quick-commerce business, Instamart, on existing markets in the near term rather than expand to new ones, seeking to improve warehouse efficiency and profitability amid intense competition, executives said on Thursday.
"We don't see the need to necessarily add a lot many more stores," Chief Financial Officer Rahul Bothra said on a post-earnings call, adding that existing warehouses had room to handle higher order volumes as demand grows.
Swiggy and rival Eternal ETEA.NS have been expanding their networks of small warehouses, known as dark stores, to meet the rising demand for rapid deliveries of groceries and other products, even as spending on expansion and competition have put profitability in focus.
Instamart added 69 net dark stores in the September quarter, taking its network to 1,240, compared with Eternal's Blinkit, which added 308 stores in the reporting quarter to bring its count up to 2,751.
Swiggy expects Instamart's adjusted core losses to have peaked in the September quarter and has forecast a sequential improvement of about 100 basis points in its adjusted core margin in the December quarter.
The quick commerce unit's adjusted core loss widened to 8.95 billion rupees from 8.49 billion rupees a year earlier, as spending on pricing, customer acquisition and warehouse expansion weighed on profitability.
Its net order value rose 34.8% year-on-year to 65.94 billion rupees, while contribution margin deteriorated to negative 1% of gross order value from negative 0.2% in the preceding quarter.
Swiggy's consolidated net loss narrowed to 9.22 billion rupees in the second quarter from 10.92 billion rupees a year earlier, but missed analysts' average estimate of 7.92 billion rupees, according to LSEG data.
Revenue from operations rose 36.1% to 75.71 billion rupees, beating analysts' estimate of 72.81 billion rupees.
Adjusted core profit in Swiggy's food delivery business jumped 42.1% to a record 3.41 billion rupees, helped by higher advertising revenue and delivery efficiencies.
The company maintained its annual food delivery gross order value growth forecast of 18%-20%, excluding its affordable meals platform Toing.
      
($1 = 94.8175 Indian rupees)

 (Reporting by Aishwarya Jain and Surbhi Misra in Bengaluru; Editing by Harikrishnan Nair and Janane Venkatraman)
 ((Aishwarya.Jain@thomsonreuters.com; Surbhi.Misra@thomsonreuters.com))