Swiggy Shares Plunge 8%: What’s Behind the Steep Decline?
February 14, 2023, marked a dismal day for Swiggy, India’s leading foodtech major, as its shares nosedived more than 8% in morning trading to hit the day low at ₹335.40 apiece on the Bombay Stock Exchange (BSE). With this steep decline, the stock has plummeted over 12% since the company reported weaker-than-expected earnings in the December quarter of the current fiscal year.
Swiggy, which had been enjoying a meteoric rise in recent years, saw its stock price take a beating, wiping out over ₹15,000 crore in market capitalization. The company’s shares had been trading above ₹400 apiece just a week ago, but the sudden decline has raised concerns among investors and analysts about the company’s financial health.
So, what’s behind the steep decline in Swiggy’s shares? Let’s take a closer look at the factors that might have contributed to this significant drop.
Disappointing Earnings Report
Swiggy’s earnings report for the December quarter of the current fiscal year was widely anticipated by the market. However, the company’s financial performance failed to meet expectations, leading to a sharp decline in its stock price. The company’s revenue growth slowed down, and its operating expenses increased, leading to a decline in profitability.
Swiggy’s revenue growth slowed down to 25% year-on-year (YoY) in the December quarter, which was significantly lower than the 40% growth seen in the same quarter last year. The company’s operating expenses, on the other hand, increased by 35% YoY, which put pressure on its profitability.
Intense Competition
Swiggy operates in a highly competitive market, with multiple players vying for market share. The company faces intense competition from other foodtech majors such as Zomato, Foodpanda, and Domino’s Pizza, among others.
Swiggy’s decline in market share is another significant factor that might have contributed to the decline in its stock price. The company’s market share has been declining steadily over the past few quarters, and this trend is likely to continue in the coming quarters.
Delivery Challenges
Swiggy’s delivery business has been facing challenges in recent times, with the company struggling to maintain its delivery times and quality. The company’s delivery fleet has been expanding rapidly, but it has been facing issues related to logistics, supply chain management, and driver retention.
Swiggy’s delivery challenges have been further exacerbated by the COVID-19 pandemic, which has led to a surge in demand for food delivery services. The company’s delivery fleet has been struggling to keep up with the demand, leading to delays and quality issues.
Regulatory Challenges
Swiggy is also facing regulatory challenges in the form of rising food safety and regulatory issues. The company has been facing issues related to food safety, hygiene, and regulatory compliance, which have been impacting its business.
Swiggy has been expending significant resources on compliance-related issues, which has been impacting its profitability. The company’s regulatory challenges are likely to continue in the coming quarters, which could further impact its stock price.
Conclusion
Swiggy’s shares plunge of over 8% is a significant development in the Indian foodtech space. The company’s disappointing earnings report, intense competition, delivery challenges, and regulatory challenges have all contributed to the decline in its stock price.
While Swiggy is likely to face significant challenges in the coming quarters, the company has a strong brand presence and a large customer base. If the company can address its delivery challenges and regulatory issues, it is likely to bounce back in the coming quarters.
Source:
https://inc42.com/buzz/swiggy-shares-slump-8-down-12-in-7-trading-sessions/
