Instamart profitability still a long way away, AOV ramp-up key to improve performance: Elara

Instamart, the third-ranking quick commerce platform by order value, can make good on its turnaround plans by the June quarter of fiscal year 2027, brokerage house Elara Capital said in a recent note. However, adjusted operational profitability for Swiggy’s fast delivery unit could be a long haul, analyst Karan Taurani wrote in the note.

Elara, which initiated coverage on Swiggy with a bullish stance, estimated Instamart will close the current financial year with a contribution margin loss of only 2%, compared with a 4% loss in FY25. This will lower the gap with segment leader Blinkit to 532 basis points from 740 basis points in the year ended March 2025. This gap is expected to come down further to 60 bps by FY28.

Contribution margin refers to the revenue left after taking out variable costs such as labour and raw materials, which can be used to cover fixed costs and contribute to profit. This metric helps measure the profitability of a business and determine prices.

Swiggy has guided for a contribution margin break-even for Instamart by or before Q1 FY27. To achieve this, Instamart will need to boost its average order value (AOV) by 21% to Rs 637, from Rs 527 at the end of the March quarter, Elara noted. This is in line with Swiggy’s guidance of high-teen growth in AOV.

The newly launched Maxxsaver feature also bodes well for Instamart’s AOV, but performance in the near-term is a key monitorable, the Elara note said.

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High fixed costs hindering Instamart’s profitability

Even as Instamart betters its contribution margin, profitability for the quick commerce major is still some distance away due to high and sticky fixed costs, Elara pointed out.

Fixed costs—on account of fewer franchise-based stores than Eternal’s Blinkit—along with investment in marketing and branding amid the current intense competitive climate, could keep costs elevated and profitability elusive for Instamart despite a contribution turnaround, the brokerage house said.

Elara said it expects Instamart’s adjusted Ebitda loss—the metric used to measure core profitability of a business—to reduce to 3% of gross merchandise value (GMV) by FY28, from 14% as of FY25. For the March quarter, the Swiggy arm saw its adjusted Ebitda loss balloon to Rs 840 crore from Rs 307 crore in the year-ago period on the back of aggressive expansion.

Swiggy CEO Sriharsha Majety said after the Q4 results that operating losses for Instamart have peaked, and the company expects to “progressively unwind losses” going forward.

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