All this while lifting contribution margin to 5%-6%, without bringing back deep discounts and heavy cash burn. The task is tougher because Blinkit is already nearly three times Instamart’s size and adjusted Ebitda-positive.
“We expect to hit overall Adjusted EBITDA break-even at a scale of about Rs 60,000 crore of run rate annualised NOV,” Swiggy’s management told shareholders in a letter recently. The company reiterated its medium-term ambition of exceeding Rs 1 lakh crore in NOV at a 4%-5% adjusted Ebitda margin.
The challenge is that Instamart must now accelerate growth without surrendering the unit economics gains it spent the past five quarters building. Its contribution margin improved to negative 0.3% of NOV in the June quarter from negative 2.5% three months earlier, but adjusted Ebitda margin remained deeply negative at about 13.4%.
Blinkit, meanwhile, reported a positive adjusted Ebitda margin of 0.6% while operating at nearly three times Instamart’s scale, according to Goldman Sachs.
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Another Rs 30 Per Order
Swiggy’s path to profitability depends on extracting another Rs 30 from each order through higher product margins, advertising, warehouse efficiency and operating leverage.“Over the last 5 quarters, we have added INR 28 per order and we need to add another INR ~30 per order to break-even at the above volume run-rate,” the company said.
It expects higher margins and a more favourable product mix to contribute Rs 10 per order, with advertising adding another Rs 10. Densification and warehouse or store automation are expected to generate Rs 5, while better store utilisation and operating leverage on semi-variable costs could add the remaining Rs 5.
Moving towards an inventory-led operating model could unlock an additional Rs 4-Rs 5 per order, potentially allowing Instamart to reach break-even at a lower scale.
Kotak Institutional Equities said the arithmetic highlights why contribution margin breakeven is only an intermediate milestone. Even after Instamart moves into positive territory at the order level, it must generate enough contribution profit to absorb technology, corporate, warehouse and other indirect costs.
More than 45% of Instamart’s store network was contribution margin positive during the quarter, up from 30% previously. A quarter of the network operated at contribution margins of 3%-5%, while five of its seven largest cities were positive on this measure.
Yet adjusted Ebitda losses remained elevated at about Rs 778 crore during the quarter, compared with Rs 859 crore in the preceding three months.
Blinkit’s Scale Advantage
Instamart’s breakeven challenge becomes starker when compared with Blinkit.
Blinkit generated Rs 17,100 crore in NOV during the June quarter, against Instamart’s Rs 5,850 crore, Goldman Sachs said. Blinkit’s sequential growth was 19%, compared with 3% for Instamart, expanding its scale advantage to almost three times from 2.5 times in the previous quarter.
Blinkit added 200 stores during the period, while Instamart added 28. Blinkit also added 4.6 million monthly transacting users, compared with 0.2 million for Instamart.
The divergence cannot be explained by basket size. Blinkit’s net average order value stood at Rs 518, only Rs 10 above Instamart’s Rs 508. But Blinkit’s contribution margin was 5.3%, compared with negative 0.3% for Instamart, while the difference in adjusted Ebitda margins was 14 percentage points.
Goldman Sachs said Swiggy carries largely similar absolute indirect costs to Blinkit despite operating at one-third the scale. Blinkit’s scale allows those expenses to be spread across a significantly larger order base.
Blinkit reached adjusted Ebitda breakeven at annualised NOV of about Rs 53,000 crore, according to Goldman Sachs. Swiggy expects Instamart to require ₹60,000 crore, or 250 million to 300 million quarterly orders.
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Growth Without Deep Discounts
Instamart’s NOV grew 40% from a year earlier in the June quarter but only 3.1% sequentially. The slowdown followed Swiggy’s decision to prioritise contribution-margin break-even over growth during the first part of the year.
That strategy is now changing. Citi described Swiggy as shifting towards “maximal growth at CM breakeven” from a “CM breakeven above all” approach.
Instamart’s four-week trending NOV growth accelerated to 10% by late July from 1% in the preceding four weeks. Kotak expects sequential NOV growth of 13%-15% in the September quarter as Swiggy accelerates store openings and customer acquisition.
Management expects contribution margin to remain between zero and negative 1% for the next few quarters as it invests in growth. That gives Swiggy limited room to use discounts aggressively without reversing recent improvements.
Bernstein said Swiggy is trying to increase purchase frequency through wallet top-ups, saver passes, private labels and strategic brand partnerships instead of relying exclusively on deep discounts. However, it estimated that Instamart is still consuming about $100 million every quarter across Ebitda losses, capital expenditure and working capital.
Bernstein expects Instamart to remain loss-making in FY27 and FY28 before reaching breakeven during FY29. JPMorgan is more cautious, forecasting that the ₹60,000 crore threshold may be reached sometime in FY30.
Citi said reaching the target during FY29 would require about 40% annual NOV growth between FY26 and FY29. An accelerated timeline would likely depend on both improved execution and consolidation in quick commerce.
Will Competition Rationalise?
The key variable is whether competitive intensity eases sufficiently for Instamart to expand without another round of heavy discounting.
Kotak said a tougher funding environment for competitors could support Instamart’s growth while reducing price competition. Bernstein similarly expects a potentially more benign competitive environment to provide Swiggy with breathing room to improve economics.
Goldman Sachs estimates that the quick-commerce industry excluding Blinkit operates at a negative double-digit Ebitda margin. As rivals increasingly prioritise break-even, it expects market share to consolidate further in Blinkit’s favour.
Swiggy, therefore, faces a delicate trade-off. Moving cautiously could allow Blinkit to extend its lead; accelerating too aggressively could push profitability further into the future.
The stakes are already reflected in valuations. Jefferies estimated that Swiggy’s market value, after accounting for food delivery, cash and other businesses, implied a negative value of about Rs 2,400 crore for Instamart. Its sum-of-the-parts calculation valued Blinkit at about Rs 1.25 lakh crore.
That valuation disconnect creates the upside case for Swiggy but only if Instamart can turn scale into operating leverage. The Rs 60,000 crore target is therefore more than a breakeven milestone but a test of whether Swiggy can regain growth without sacrificing the economics it has spent five quarters repairing.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
