Swiggy Ltd (NSE: SWIGGY) Q3 2025 Earnings Call dated Feb. 05, 2025
Corporate Participants:
Abhishek Aggarwal — Vice President, Investor Relations
Amitesh Jha — Chief Executive Officer of Swiggy Instamart
Rahul Bothra — Chief Financial Officer
Rohit Kapoor — Chief Executive Officer of Food Marketplace
Sriharsha Majety — Co-founder, Managing Director, and Group Chief Executive Officer
Analysts:
Sachin Salgaonkar — Analyst
Ankur Rudra — Analyst
Aditya Soman — Analyst
Sudheer Guntupalli — Analyst
Swapnil Potdukhe — Analyst
Vijit Jain — Analyst
Gaurav Malhotra — Analyst
Garima Mishra — Analyst
Nikhil Choudhary — Analyst
Aditya Suresh — Analyst
Abhisek Banerjee — Analyst
Samarth Patel — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the earnings conference call of Swiggy Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions. And after the presentation concludes, should you need assistance during this conference, please signal an operator by pressing Star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Agarwal, head of investor relations from Swiggy Ltd. Thank you. And over to you, sir.
Abhishek Aggarwal — Vice President, Investor Relations
Thank you, Amir. Hello everyone and welcome to the third quarter FY2025 earnings call for Swiggy. Our financial results and shareholders letter have been published on the exchanges and the information pack has been placed in the investor Relations section of our website, www.swiggy.com corporate. We would like to inform you that the management may make certain comments on this call that one could deem forward looking statements. Specifically, the financial guidance and pro forma information that we will provide on this call are management estimates based on certain assumptions and have not been subject to any audit review or examination procedures. SWIGI does not guarantee these statements and is not obliged to update them at any time. Joining me on the call today are Sri Harsha Majeti, our MD and Group CEO Rahul Motra, our CFO Rohit Kapoor, CEO of Food Marketplace and Amitesh Chath, CEO of Instamart.
With this brief preamble, let us start the Q and A. Operator, you can please go ahead.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Question from the line of Sachin Salgaonkar from Bank of America. Please go ahead.
Sachin Salgaonkar
Thank you for the opportunity. I have three questions. First question is regards competition. Clearly in 3Q competition was high. I just wanted to get a sense that, you know, are you seeing signs of competition abating or the general thought processes. Competition might remain high for a foreseeable future because some of the other platforms are not even launched fully out here.
Amitesh Jha
Okay. Hi Samitesh here. I will take the first question. It’s very difficult to crystal ball gaze in terms of what is going to happen in the market. The way we essentially look at it is that the total addressable market size is big, the opportunity is extremely high and for any this size of the market the interest rate will be more and competition essentially will be there. So the way we look at it is that the competition will always exist. Intensity is very hard to get or gauge immediately right now. But at least for some time we see it being at the level that we are seeing right now.
Sachin Salgaonkar
Got it Amit. So intensity is almost same in Jan and Feb. All right, second question. Wanted to understand a bit on the impact on contribution margin. What we saw now clearly there are two big parts to it, right? One, store expansion, replacement of store. Second, how consumer incentives are given customer acquisition between these two levers. Can you highlight because when we look at the numbers at least one gets a sense that it’s the customer incentives and acquisition cost are the ones which is relatively higher into this quarter. Is that a fair assessment and how should we directly think about these two levers going ahead?
Amitesh Jha
Yes. See if you think about it, even store expansion in a way is getting into new markets and acquiring essentially new customers. So the way we look at it is that effectively investments are being made to expand the market overall and in that expansion of the market for customer acquisition, expanding of stores are important as well. Going to new cities as well. So we look at it in the same way that we are spending to get more customers onto newcomers. Sorry as a quick commerce and that expansion that includes acquiring new customers and in existing pods as stores as. As adding more stores is essentially leading to that, you know, that investment as well. So it is. We don’t look at it separately in terms of how much it is expansion versus this, but the way we look at it, we are expanding the market. It will be in the same store. It will be in the new stores as well. And which is the reason why this extra investment has been made.
Rahul Bothra
Yeah. And maybe if I may just add Rahul here that yes, there are two parts to this equation, right? One is the overall investment that we are making in both densification in existing cities as well as new city addition and the store expansion that’s happening. And the other part is really around the structural P and L that continues to improve. Now if you look at the levers and some of the KPIs that we have already demonstrated, average order value has grown by 14% on a year, on year basis. Now this is an important determinant of our medium term guidance on contribution margin as well. As you see, our take rate has expanded and continues to expand sequentially. Our cost of delivery continues to go south with the densification of the network. So structurally the P and L of the mature stores continues to get better. And that’s the other part, right? So you have to look it into two parts. One is the growth investment and the other is the structural P and L and our continued ascendancy on the levers at play.
Sachin Salgaonkar
Rahul, just to clarify, when you say in a shareholder letter that contribution margin will be range bound, is it in the range of 4 to 5% or any other numbers we are thinking.
Rahul Bothra
No. So say it’s hard to crystal ball as I said. At the same time, if you’ve seen our store addition growth, previous quarter we added 96 stores. Just in the month of January we’ve added close to 86 stores. So our store count is already close to 800 stores. Our guidance from H2 was doubling our square footage coverage from 2 million to 4 million. We are sticking to that guidance. As you can see that this means that there is a back ended, you know, growth in quarter four and we are on track to achieve that.
Sachin Salgaonkar
And my last question is, you know, on the same point, what you said is what we are seeing is some of your competitors are super aggressive in terms of expanding number of stores out there. Any incremental guidance you want to give beyond the 4 million square feet, what you intend to achieve in March 25, is there a target in terms of stores on Mega Pods that we could expect Swiggate to have in the medium term.
Rahul Bothra
No, it’s hard to again say that. I think our near term store expansion was both geography led as well as densification into satellite areas in the existing towns and managing growth. So I think we are going to take it as we see. I think currently we are focused on delivering on the current guidance of expansion. It’s also fair to assume that a lot of growth from here on Store Edition is going to be to manage the overall category growth and not necessarily entering into newer areas. So that’s how you should think from a medium term perspective.
Sachin Salgaonkar
But is it also fair to say that if we see your competition going and adding more stores, there will be a sort of a response from you guys also in terms of looking to narrow the gap?
Rahul Bothra
So again, as I said, our strategy is more towards densification in our existing cities, managing growth as well as the cities that we have chosen to expand as part of the current expansion phase. And then we are going to wait and see how the performance has been.
Amitesh Jha
So the way to think about it is that we look at where the consumers are who are more likely to essentially come onto the quick commerce platform and build stores, according to that. So it will require things like really densification going into specific locations where it will essentially make more sense. So it’s more look at the market, what it is, what’s the time where we are working at. And we don’t necessarily will be looking at competition growth to basically drive our strategy. Our strategy is very clear. We know what our time is, we know what kind of market we are, what kind of consumers we are looking for, and we are very focused to make sure that we do deliver them in the right experience as well. And which is the reason we are focused on doing this particular part extremely well.
Sachin Salgaonkar
Got it. Thank you both.
Operator
Thank you. The next question is from the line of Ankur Rudra from JP Morgan. Please go ahead.
Ankur Rudra
Hi. Thank you. The first question is on, you know, starting with the quick commerce side. You mentioned darkstore editions were quite strong user activation, but if I look at the order growth this quarter, it seemed a bit soft at about 7% sequential only, which was softer than both the MTU growth and the increase in the real estate footprint. You mentioned growth largely from AOV expansion. Can you help describe what’s happening here within the business? Is there any issue with retention of customers or is the order frequency falling for you?
Amitesh Jha
Yeah. No, no. So I see the way to basically think about it is that a lot of these growth also happens because of the new customers that we acquire is because of the new areas that we essentially entered as well. The headwind that we saw in terms of our overall growth in both customer and in terms of unit was mostly because of expansion, which we essentially saw.
To look at it from the right perspective, the way at least we look at it is that what the size of the wallet that we are essentially taking from the end consumer and we are focused on that, if that size of the wallet from every consumer is increasing, we are effectively being more relevant to them and which is the number that we will be essentially looking for. So the other thing that we look at and which is also very important for, is that when we are acquiring customers, is the retention essentially high or not? And all our spends are based on that. We see this retention number being essentially very high, and we are effectively saying that.
Our MTU which was. And if you look at our increase as well, and something that we have spoken in our shareholder letter as well, that mtu, the monthly transaction user base has also increased a lot lately. So what we are doing is focusing on trying to get our strategy right on expansion as well as acquiring new customers. The later on increase is happening because of that particular spend. The headwind that we saw was mostly because of not increasing the rate of the stores as much as we essentially wanted.
Ankur Rudra
No, I appreciate the fact MTU has grown a lot. My point Amitesh was in terms of the order growth was only 7% sequentially. If you had about 12% growth in MTU, you should have ideally had. If the frequency of ordering is broadly similar, you should have had a stronger overall headline or number of order growth given footprint is rising. I was just wondering if there’s anything specific which you faced during the quarter which may have held the order growth back or is there anything seasonal in your business which you may have seen.
Rahul Bothra
Yeah, I think one of the things that we saw was the store expansion was also a bit essentially back ended which is the reason why you see that MPU and order. So what essentially happens is when you acquire a customer, their orders won’t increase immediately and if the store expansion is a bit back ended, new customers are going to come essentially later in the quarter and which leads to these particular efficiency numbers as well. So to really think about it is that in general our growth is related to what is the percentage of new customers that we are essentially having. If those percentages are higher, it will lead to a lower order frequency as well. And that is what we are doing right now.
Ankur Rudra
Understood. Just maybe moving on in terms of the food delivery business quickly, we did see margins improve quite a bit. Just if you can give us a sense of what drove the overall unit economics over there, how much of this was moderating delivery costs versus any changes in take rate because it didn’t seem like take rate expanded meaningfully on the food delivery side.
Rahul Bothra
Yes, contribution margin has expanded meaningfully for us. It’s a continuous effort upside on the monetization across levers that we have had through the year. And some of that has meant that we continue to see the operating leverage start to play out. Now specifically to this quarter. Some of if you’ve seen the average order value has expanded, which means there’s a denominator impact with our cost of delivery is continuing to getting more and more efficient. So there are factors around both monetization as well as the delivery costs. Having a bit of leverage. With the expanded basket sizes.
Ankur Rudra
Okay, just a quick question on the demand on food delivery consumption in general, your growth did slow down a bit. Your peer also saw the same thing. They made a comment about consumption softness. Did you see any of that? Are you seeing any change in growth momentum or consumption trend on food delivery in the current quarter?
Rohit Kapoor
It is Rohit here. I think if you look at the MTU growth, quarter on quarter we actually saw MTU growth. So for the quarter was 14.9 compared to 14.7 the previous quarter. Also we did have growth. It was a quarter which is slightly softer than other quarters. But that’s I think overall year on year we are growing 19.2% which is within the range of what we guided the markets about 18 to 22% growth for the category. Our pace of innovation and execution on food continues to be pretty strong.
We have, we’ve launched Bolt, scaled it up to 425 cities within three to four months and a bunch of other launches that you would have seen from us coming in the last quarter. I think even if there are some headwinds which are there in the economy per se in certain segments, the present budget which has on the tax cuts we do believe gives an impetus to a large section of the tax paying segment below 12 lakhs and that does constitute many of them will be consumers of our services. So we do feel at this point in time as facts stand today reasonably that the guidance that we’ve given is operating in the range.
I think food delivery is a little bit of a seasonal business. So quarter on quarter variations are not unlikely. But secularly over the short term to medium term we don’t see a significant headwind and of course we have our job cut out in terms of innovating, developing new use cases and creating more opportunities for the consumers to use us. But structurally we don’t see any big change from last quarter. Dialogue and guidance that we give after listing.
Ankur Rudra
Thank you. Just a last question on working capital. There appears to be an increase in receivables for the last two quarters. In fact the nine month period and almost a positive working capital cycle for nine months 25 versus negative working capital cycle last year. Is there any change in the business which is this. If you can highlight what’s driving this in general. Thank you.
Rahul Bothra
Sure. So as you can see I know with the overall advertising pie increasing in the specifically in the quick commerce business where typically the FMCG companies and the brands pay us with a certain credit cycle. So that’s been the large determinant of the increasing working capital on that line.
Ankur Rudra
Okay, so only that both the quarters.
Rahul Bothra
That’s right.
Ankur Rudra
Thank you. Thank you ambassador.
Operator
Thank you. The next question is from the line of Aditya Soman from clsa. Please go ahead.
Aditya Soman
Hi, good evening and sorry to dig a little bit more on this contribution for quick commerce but I see that the contribution has actually gone down by about 14 rupees per order. This has gone down from sort of contribution loss of 10 rupees per order to 24 rupees. Now if I see the drop for Zomato, while it was also there in the quarter it was much lower from 25 to 21 and they added almost 2x the number of stores. And you also indicated that your stores were more back end towards at the end of the quarter. So I’m just trying to understand where this incremental cost has gone in because you also saw a significant jump in AOV and take rates also improved. So I’m just trying to understand how this contribution for order actually works in.
Rahul Bothra
Yes so much. Thanks. Yeah, yeah, thanks Aditya. I think if you’ve seen some of the reasons that we have mentioned specifically around the investment that have gone into the contribution margin line, includes the elevated expansion activity that we have done in terms of adding stores. It’s also got to do some bit of the heightened competitive action that we have seen in acquisition of new users as well as some of the dormant reactivations. So we have seen an investment increase overall due to these two factors.
Aditya Soman
But I mean I’m just comparing like for like because even if you compare with your competitors, I mean they also seem to have similar growth. But, but the take, I mean and, and your take rates actually improved and, and so I’m just wondering on a like for like basis why should it be that different where they have seen a three rupee drop per order and you’re seeing almost a 14 year. I mean I’m just trying to understand in more detail is there, is it because you expanded in more cities or is there something more to it that we don’t see from, from the shareholders?
Rahul Bothra
Sure. See I can respond for our kind of trajectory and we have mentioned in the past that there are a few determinants of the overall profitability of the business and getting into contribution margin positive. So one of them is average order value. We do believe that there is room for us to grow Also looking at some of the category AOVs that we see in the public domain which means that the task is cut out for us. So we are in a trajectory of getting to that place where a lot of these mature stores start spinning out cash which then has a portfolio impact on the overall margin delivery.
So for us we are slightly behind the curve from that perspective in terms of maturity of stores and the profitability profile, which is led by some of the average order value line as well as the advertising revenues which have started to move up meaningfully. So, as we have mentioned, structurally the P and L continues to improve on a quarterly basis. Some of the mature stores are starting to reflect what steady state unit cost should look like with both operating leverage kicking in and some of these monetization levers also. Kicking in. So it is a path, it’s a trajectory that we are guiding to and we are also staying committed to delivering a contribution margin positive by the OND quarter in the current year.
Aditya Soman
That’s very clear. Thank you. And that’s heartening to know. I’m just trying to understand again in terms of the path that you indicated. So would this be just a function of the number of orders obviously going up and then a lot more stores hitting maturity? Would that be the best way to look at this?
Rahul Bothra
Absolutely right. So as you’ve seen both in quarter three and the quarter four, the number of store additions that we are doing, we are almost doubling in a span of six months. And by the time of our guidance that we have given, we do expect a lot of that stores to start hitting break even volumes and meaningfully contribute to reduction of the overall contribution margin loss. But more importantly, the mature stores will start getting into the trajectory of close to that 4 to 6% positive minor trajectory, which then means that overall portfolio level we expect to break even.
Aditya Soman
Thank you very much. That’s it.
Operator
Thank you. The next question is from the line of Sudhir Guntapalli from Kotak Mahindra Asset Management company. Please go ahead.
Sudheer Guntupalli
Hi, good evening. Thanks for the opportunity. My first question is on food delivery. It looks like we have gained some market share in food delivery. So is this primarily driven by the incremental demand that is being generated by Bolt offering, which is a 15 minute delivery offering, or is it more of a broad based market share gain across the existing portfolio of food delivery as well?
Rohit Kapoor
Hi, Sudhir, this is Rohit here. I think we don’t talk about market share in our numbers, our numbers out there and other numbers out there. You can do the comparison for yourself. I think just in terms of our own growth, it is I would say a factor of three or four things. One is we have been working on execution and strengthening our execution all across, whether it is on the restaurant side, the consumer side or the delivery partner side. And that started to show up.
Second is there’s been a constant stream of innovation and taste coming out of Swiggy over the last few months and including something like Bolt. And I think we took a bet on Bolt and it’s been now about a quarter. So what we the 9% order contribution on Bolt is only for after from a service which is barely a quarter old, a quarter or thereabouts. And there’s a lot of room for further innovation or growth on top of this is what we believe we remain excited about the space.
We are also seeing good response from consumers as well as the restaurant partner ecosystem, because this is one offering where the restaurant partner ecosystems people are coming forward and they are saying that let’s partner a little. Create more and let’s see what we can do more on this front. I do think this combination of factors, definitely the pace of innovation and the pace of execution is a factor behind the growth that we are seeing in MTU and year on year volume growth and UV growth.
Sudheer Guntupalli
Sure Rohit, just on the put delivery, just a follow up.
Rohit Kapoor
I think the other. Sorry. And that is also coming on the back of no compromise in terms of margins. If you see the margins have expanded about 90 basis points, the EBITDA is expanded by another 90 basis points. So it’s starting to flow through and the operating leverage you can see in the business appear we remain reasonably confident of guiding towards the 5% EBITDA number that’s been there in public domain.
Sudheer Guntupalli
Sure Rohit. So my follow up question is actually on margins. So given the impressive expansion in margins this quarter in food delivery, is it fair to assume that Bolt as an offering is not dilutive at a unit economics or a margin level?
Rohit Kapoor
I think given that this is a fairly competitive scenario, I will not refrain from talking on bold margins. But overall at a platform level I think through multiple levers we are in a good position to balance out any investment that we have to do. Right. Because and generally this has been the way the margins have expanded over time is not one single silver bullet or one investment taking down margins. Whenever we have invested in any area we have been able to juice out other areas in terms of whether it is, you know, delivery costs or efficiencies. So I personally don’t think that I like to comment on the Bolt numbers at this point in time or specifics beyond this. But even if Bolt grows from here, which we expect it to, we do continue to see our margins expand both on contribution side and operating leverage kicking through ebitda.
Sudheer Guntupalli
Sure Rohit. And one question to Rahul. So you are maintaining your contribution margin breakeven timeline of OND quarter despite calling out a bit of a heightened competition and also that very back ended store editions, even next two months you have 100 stores per month, kind of an addition. Despite all of this you are talking about contribution positive by OND quarter. So what gives you that confidence? Firstly on adding 100 stores per month, what gives you the confidence? Secondly, despite these factors getting contribution positive by the same timeline, what gives that confidence?
Rahul Bothra
Sure. Thanks Sudhir. I think and parts of it I’ve addressed it right. See what’s happening in our business is that structurally if you look at all the levers, whether it’s on monetization or cost, they have to. A certain trajectory and AOV being a large determinant, we are seeing pretty strong growth on that, both as a combination of our added footprint as well as the coverage. In terms of the SKUs, there’s a lot more customers are getting access to a lot more categories and SKUs, so that continues on a very positive trajectory. We maintain our guidance of delivering double digit YOY growth for the near future and that is a meaningful change.
The other thing, what happens is, as I mentioned, any new store takes anywhere between six to nine months to what we call hitting the breakeven volume. And towards the end of our guidance quarter, we do expect a lot more stores to be in that zone. And also the pace of store expansion may not necessarily continue at the current level because one of the things that we have done through our mega port expansion is also get users a lot more access to categories without necessarily having to add a lot more number of stores itself and at the same time delivering the customer experience. So there is a strategy that we have to be able to get many of these stores mature by the time our guidance is currently given.
Sudheer Guntupalli
Fair enough, Rahul. One last question as a follow up of what Ankur has asked earlier is the transacting user growth of 12% sequentially looks very good, but the order growth being slightly lower. Is there any intervention from our side in terms of increasing the minimum order value for free delivery, so on and so forth, which has led to a slightly, which has led to an increase in AOV but a bit of a reduction in the frequency? Or is it completely led by, let’s say, more new users and new geographies coming in with the lower frequency?
Amitesh Jha
Yeah, hi, this is Amitesh here for Instamart. Yes, the MTU growth is led by new users. New users typically take some time for them to mature and be sticky to a platform. The larger part of the headwind is essentially that only and that’s the right investment to make as well because that leads to a better, you know, larger market for the platform. We believe that doing that investment earlier is better than doing it later, which is what essentially Rahul was also speaking about. So yes, all the best. The main reason is that. Yes.
Sudheer Guntupalli
Thanks. That’s it from me. All the best.
Operator
Thank you. The next question is from the line of Swapnil Poduke from jmfl. Please go ahead.
Swapnil Potdukhe
Hi, thanks for the opportunity. So I had two to three questions. First on Instamart site. So there was a launch of a standalone Instamart app in this particular quarter. Have you guys seen any incremental adoption because of the app? And do you see any benefit of having a segregated app going forward? And will you see any changes in your strategy?
Sriharsha Majety
Hi Swapnil, this is Harsha. Honestly the app only launched last month and it’s very early and we’re closely watching and understanding user behavior and we’ll be able to share more information once we’ve seen the progress over a period of time. And definitely I think the intention as we written in the report as well is that, you know, as the user base expands and goes into a lot more cities and categories, I think we’re definitely curious to understand user behavior and how it progresses and when we have more information we’ll be sure to share it.
Swapnil Potdukhe
Okay, no worries. The second question is with respect to your fixed cost on the quick commerce side especially because there is seem to have gone up meaningfully. Now I understand there was some branding related expenses increase and there was also some new hiring that happened in the big commerce business. But my question then is like have you seen all those cost? Are they in the base of this particular quarter or we could see some of this incremental cost coming in, you know, next one or two quarters as well.
Rahul Bothra
Sure, Rahul. Yeah, so I think as we mentioned, a lot of that additional cost has gone into both performance marketing as well as brand marketing which is to get higher number of customers onto our platform. We do expect as we had mentioned that in the near at least the next one or two quarters this heightened activity to continue because there is slightly competitive environment at play right now.
Swapnil Potdukhe
So just to extrapolate that, is that the reason why you mentioned you reiterated your guidance for Contribution margin profitability by 3 QFY26 but for some reason your guidance at any adjusted EBITDA level is missing this time around which was there last quarter?
Rahul Bothra
No. So at the corporate level, you know our guidance stays see at the corporate level which is, you know, combination of food and quick commerce, we still stay put with our guidance of getting to profitability by the O and D quarter. Now coming to quick commerce specifically I think we still have to. The picture has to still play out. We are still in early stages of the category evolution. We don’t know how deep the customer funnel can be and therefore there could be certain marketing investments that we want to continue to make depending on how the category continues to grow. So we will come back to you with more specific guidance around below contribution margin cost as we see the category evolve.
Swapnil Potdukhe
Okay, got it. And the last question is on food delivery. Now, you’re very clearly indicated that Bolt is something which seems to be helping you grow faster than the, you know, the other competitor.
Now my question to you is like, is Bold? I mean, what, what percentage of this 9% orders from bolt were already there in the system? You’re already delivering between 10 to 15 minutes earlier versus right now you’re doing 9%. So what, what is the incremental order have been able to do because of Bolt specific Bolt standalone, you know, marketing?
And the second question is, what kind of an impact does Bolt orders typically have on your delivery cost? Because my sense is like, you need higher penetration when you’re doing higher penetration of delivery riders when doing orders within a certain specific period of time.
Rohit Kapoor
Yeah. So, hi, this is Rohit here. Let me take the second question first because that’s easier. Actually, that assumption is not correct, that if you’re trying to deliver in a shorter period of time, your debris costs are necessarily higher because one of the key components of Bolt is a shorter delivery last time. That’s how the model works. And in that model, in our payment to delivery riders is linked to a large extent to the last mile they travel. So actually, without getting the actual numbers, that assumption is incorrect.
In fact, we do expect Bold to actually lower overall delivery costs even now and over a period of time. So that just want to clarify that from a model standpoint on incrementality first, I think now or in future it will be. I don’t think we’ll be sharing these numbers because again, it’s very competitive in nature. But the one thing I can tell you is that it is a Service. We launched three, four months back. We scaled it to 450 cities, and it is just a quarter old. So the version of Bold that you’re seeing today is probably version one. As we expand, we’ll obviously try and use Bold to do two, three things.
One, is deliver new use cases, B, to the consumers who care about A, faster delivery, we cater more frequency to them. And C, I think we’ll also see innovation from the restaurant ecosystem coming on the back of Bolt because we have created this, what is called a platform or charity. And it’s for the restaurant ecosystem to also come and put their innovation on top of this. So a lot has to play out here. So it’s too early to say that. You know what? We do know the numbers. And I think the reason we are continuing to bet on it is we are confident to see incremental. How much of it is, as you can imagine, competitive in nature for us to disclose on this call.
Swapnil Potdukhe
Understood. Just one last if I can squeeze in the fixed cost on the food delivery side seems to be stable for the last four or five quarters. So part of the margin expansion benefit that you have been able to drive is because this cost not growing. How do you see this cost going forward? I mean should we expect them to be around360,370 crore of range quarterly expenses? We may see some increasing on that side as well.
Rahul Bothra
Sure. Rahul here. So I think what we have delivered is roughly say 80 basis points on a yearly basis on operating leverage. Now with period of time I think the impact will reduce. However, it will still be meaningful contributor to our overall guidance of getting to the 5% EBITDA mark. So it is going to be modulated the overall investments. As you have seen, we have had a few cost efficiency programs. Our overall marketing budgets as well as the talent budgets have been in a very tight range and we have been able to deliver. I think there is going to be some incrementality to it, but a lot of that will flow through back into operating leverage.
Operator
Thank you. The next question is from the line of Vijit Jain from Citi. Please go ahead.
Vijit Jain
Yeah, thanks for the opportunity. My first question is so you know, you added 96 stores in Jan, which is a pickup versus the entire of quarter 3Q so how much of the contribution margins in the quarter is due to stores not yet active as of December 24th and if you can, you know, separately just talk a little bit about between when you start to see expenses on a store and when it gets activated on the platform? What is the kind of time horizon are we looking at? That’s one. And second, is there some element of advanced expenses on the performance marketing spending as well where you’ve seen expenses or you’ve incurred expenses but it hasn’t resulted into, you know, a conversion into MAU or mtu.
Rahul Bothra
Right. So the first question around, you know, the store cost or the, you know, the fixed cost that we incur before the store become operational. So typically, you know, that lasts for up to 30 to 45 days and that’s already factored into the current, you know, margins that we have, you know, delivered. The second question around, you know, the digital marketing and you know, whether that’s given the results, you know, by the nature of it, performance marketing is meant to give immediate results. Now due to heightened competitive action, the CACs can go up or down depending on how much of investments are going. To it by the category. So that’s something that we do see some bit of headwind there. But over time we are also getting a lot more efficient. The overall category growth is pretty stellar and we do expect CACs to continue to go south.
Vijit Jain
Correct. So Rahul, just to clarify on the first part, when you say 30 to 45 days. So there will be some expenses related to these 96 odd stores in January above the contribution line as well for QOO Commerce.
Rahul Bothra
That’s correct. That’s correct. So that’s already factored into the OND quarter.
Vijit Jain
Got it. Thank you so much.
Operator
Thank you. The next question is from the line of Gaurav Malhotra from Access Capital. Please go ahead.
Gaurav Malhotra
Yeah, hi. I just wanted to check, you know, coming back to the contribution margin for quick commerce now, the aggression in the market, I think so, probably started mid quarter in 3Q. It was obviously not there for the entire quarter. So the full impact of that will be probably seen in the fourth quarter, the Jan to March. And we are also sort of ramping up the store editions during the same quarter. So just wanted to get some understanding as to then how should we think about the. The being in the similar range, the contribution margin when the competitive intensity will be for the full quarter and there will be also accelerated store count. So how do we sort of reconcile this along with the margins being in the. In the same ballpark? Thanks.
Rahul Bothra
So see, it’s hard for us to give a specific number in terms of how this will play out. I think however, we do believe that it will be in a tight range. Right. So the overall say margin contraction that happened sequentially, we don’t expect the same level of margin contraction to continue. So it will be in a tight range.
Gaurav Malhotra
Okay. All right. Thank you. That was it.
Operator
Thank you. The next question is from the line of Garima Mishra from Kota. Please go ahead.
Garima Mishra
Yeah. Hi. Thanks so much for the opportunity. First question again, competitive intensity on the quick commerce business. Right. I mean one aspect is discounting. The second aspect is also on elevated costs that you might see for expenses such as rental delivery agents, etc. So can you comment a little bit on the latter part? Are you seeing high rentals and other costs in general as your competition also is expanding quite rapidly?
Amitesh Jha
Hi Amitesh here. See one of the things that we also spoke about is that we are looking at our P and L in a very structural manner. And in that obviously costs are an extremely important of it. So there is absolutely no impact on rentals. Our cost efficiencies are actually becoming better because we are seeing more densification of order also because of which the last mile cost also goes down. The AOV is also essentially going up. That also helps in better operating leverage as well. So generally, to answer your question at a very high level, know that competition intensity is not and we are also being very committed to our discipline to cost to make sure that we are not letting go on area which is very structural to any kind of retail business.
Garima Mishra
But Amitesh, that is the contradiction, right? Because those areas would be important to others as well. So how does one take a call that this is the right cost structure to operate in that area and on on same lines? Have you closed any stores at all because of cost structures or competition?
Amitesh Jha
Sorry, I didn’t understand the question clearly. But if the. If the question is there on that are we making sure that whenever we are opening a store we are not putting it in the. No, for we have not like shut down any pod for any kind of competitive reason at all nor we have taken up any pod which is for whatever shutdown of stores happens is basically because we want to relocate the stores, move to certain other regions and we have a very fair idea of what is the structural cost to run a store. And we are making sure that whatever we do, we don’t really deviate from there. But I didn’t understand your questions clearly. If there is something else, please do help me understand.
Garima Mishra
That answers the question. Thanks. Second question on QC is that you have given out your target of achieving contribution margin eventually in this business. So does that sort of assume that the addition of store, the pace of addition of stores starts coming off? Because if this addition just remains very high, achieving that target becomes that much more difficult. So just trying to understand how to read that.
Rahul Bothra
Yeah, so Garima, maybe I can come in here. So as we have mentioned that as a combination of the average size store as well as the mega port, we do expect to increase the overall coverage in terms of categories as well as selection available to consumers without necessarily having to add that many number of stores. So most of the store addition expansion after the current guidance is going to be growth led and not necessarily to service unserviced areas hitherto.
Amitesh Jha
And one more thing that you have to look at that even if the store addition is constant per month because of the number of additions that we are doing over the first half of the of the year, the percentage contribution that is going to come from new stores will consecutively essentially go down all the time, even at a flat say essentially additional stores. So when you are thinking about contribution margin, think about it is that there will be more percentage of mature stores than within non mature stores at the quarter where we are speaking about. That will be the contribution.
Garima Mishra
Yeah, got it. And last question from me. This quarter you’ve mentioned that non food categories contributed to roughly 86% of your GMV. So how much more can this number go up to? As I’m sorry, food contributed to 86% so non food was 14%. Yes.
Amitesh Jha
Sorry, I was just trying to reconcile that. Yes, see I think last time also we spoke about it, the customers are essentially asking for more and more categories and are also willing to have a bigger share of the wallet. And that is the reason why we are expanding our mega ports as well, having a lot more assortment in place which will be mostly electronics, appliances, general merchandise, all those categories. So to think about it, yes, it will continue to go up. We believe that in terms of essentially category growth, the new categories will far outstrip the growth of existing SME categories and we see that as a secular trend going forward for at least a year, if not more.
Garima Mishra
Got it. Thank you.
Operator
Thank you. The next question is from the line of Nikhil Chaudhary from Nuvama. Please go ahead.
Nikhil Choudhary
Hello?
Operator
Nikhil Chaudhary? Yes.
Nikhil Choudhary
Yeah, thanks for the opportunity. Just want to probe a little bit more on the contribution margin comment that the store expansion were backended. So is it fair to assume that the impact on contribution margin from new stores actually get to fully come and that will happen in next quarter. And contribution margin dip also happened for our existing 609 store which we had in Q2. Is it fair assumption?
Rahul Bothra
No. So there are two parts to it, right? One is, as I said, certain investments that we’ve had to make. And the second part is the structural P and L continuing to improve with all the levers at play. So it’s a combination of these two which gives us the portfolio level margin. Now specifically on quarter four, as I said, we can’t kind of put a number there, but it’s on a tight range is how we think of it. With stores continuing to add on the positive trajectory as well as some of the new stores also contracting margins but overall the portfolio level it will be on a tight range.
Nikhil Choudhary
Got it. Just wanted clarity. If we have seen decline in contribution margin material decline for existing 609 store which we had in Q2, is it fair?
Rahul Bothra
No. So as I said, it’s a combination, right? So it’s a combination of us investing in new users as well as the store expansion. So it’s you know, not necessarily due to do with the 609 stores because many of those stores would actually also turn profitable because they would have hit a certain maturity profile. Got it. Investments are happening across the portfolio.
Nikhil Choudhary
Got it. Just one clarity. On your guidance of achieving adjusted EBITDA break even by Q3, are we assuming that competitive intensity will be materially lower by then and that will lead to losses in QC pretty much lower or we are assuming that despite of current level of competitive intensity we will be able to achieve the breakeven in our open source.
Rahul Bothra
Yeah. So you see it’s hard to really put a crystal ball to in terms of how the competition intensity is going to be, how many new players are going to enter, what will be the overall spending pattern. I think the current guidance is basis what we know today. This is our internal plan that we had signed up for and we remain, you know, confident of achieving that. Now if there’s any new information about new heightened competitive activity or it, you know, accelerating or decelerating, we will come back to you with more specifics. But as of now we stay committed to our current trajectory.
Nikhil Choudhary
Got it. Understood.
Rahul Bothra
The adjusted EBITDA break even is at the corporate level and the CM breakeven for the Instamart business.
Nikhil Choudhary
Got it. Understood. Yeah, that’s for myself. Thank you.
Operator
Thank you. The next question is from the line of Aditya Suresh from Macquarie. Please go ahead.
Aditya Suresh
Thank you for the opportunity. I had two questions. First maybe for Harsha. Harsha, obviously market dynamics are fairly fluid. What in your vantage point are the top three financial priorities for Swiggy and are you drawing any boundary condition of the losses you’re willing to fund in Instamart over the next say 12, 24 months?
Sriharsha Majety
Hi Aditya Harsha here. If you look at the overall business, I think the only big investment area happens to be Instamat. But at the same time we’re also looking at the 40 to $50 billion opportunity in three, four years. So our eyes are all about how can we execute, serve customers well and invest to be a dominant player at the end of this investment cycle. But given the overall trajectory of different businesses, food continues to grow and increase profitability, et cetera, at an overall level, we feel comfortable investing as long as these are going to ensure greater success for us in our business when we play it out over the next few years.
Aditya Suresh
And in terms of financial priorities, Harsha, are you able to rank sort what priorities are for sri?
Sriharsha Majety
I probably can’t give you like a specific rank sort. Each of them, each of the businesses have different trajectories and the sum together is how we look at it. So it’ll be hard to kick into a rank sort to be honest. But obviously given the investment level are heightened, the market landscape is the most dynamic in Instamar. Obviously all our eyes are on ensuring that we navigate that really, really well over the next two quarters.
Aditya Suresh
Is the board put any kind of cap in terms of the funding of losses? Maybe that’s 250 million. Any absolute numbers which the board is kind of continuing to spend on?
Sriharsha Majety
No such conversations have been had. I think the board conversations have always been and continue to be on how to make successful, how to make each business successful. So
Aditya Suresh
Got it. And maybe if I can just like try to ask a different question then. Right. So on ESOPs can you probably help us understand what the financial metrics kind of associated with this are attached to this? Maybe that will help us kind of understand the priorities here a bit better as well. In that 1224 months.
Rahul Bothra
Right. I think we had shared specific the ESOP terms especially for the, you know, the senior team. There are you know back ended ESOPs that have been given. They also link to you know both share price, you know, appreciation. So there is a unlock of 30% which happens at 525 rupees and you know, 700 rupees. So there are specific guidance that we have given in our shareholder letters which is related to share price appreciation which is linked to the management incentives on esop. So that’s the philosophy.
Aditya Suresh
Thank you so much and wishing you the best.
Sriharsha Majety
Thank you.
Operator
Thank you. The next question is from the line of Abhishek Panerji from ICICI Securities. Please go ahead.
Abhisek Banerjee
Hey, congratulations on good show in food delivery. I had a few questions on quick commerce first. So you have mentioned the 96 store editions in Q3 FY25 which is obviously the net edition number but what would be the gross edition number? If you could let us know please.
Rahul Bothra
Yeah, so we roughly had, roughly say there will be 110 or so which is a gross level. The 15 stores that we may have closed is mostly towards either changing the specific pin or making it into a larger store. Right. So we have been on a continuous journey of expanding the average size of these stores. So some of that store additions have happened, but on a net level, at the cost level, they would be roughly 15% higher.
Abhisek Banerjee
Right. So therefore when you move from a smaller store to a larger store, that also has an inflationary effect on your fixed expenses rate, which comes before contribution. So therefore that also has an impact on the contribution margin going down.
Rahul Bothra
That’s right. For the very short term, yes. But you know, over time, you know, we get a lot more operating leverage because of the expanded AOVs as well as the, you know, ability to service a larger, you know, customer base and order base.
Abhisek Banerjee
Absolutely, absolutely. But in terms of where are you in this journey of, you know, extending the number of stores, extending the size of existing stores? Because I saw that the average, you know, area per square feet is moved to about 3475. So are you mostly done with that journey?
Amitesh Jha
No. So. Hi Sanitesh. So the way we look at it, there are two parts of our core expansion that we are doing. One is more deterministic, which is the megapods that we will keep on expanding and that significantly increases the Fairfoot area, which is there. The other part is more essentially dynamic in early nature where we keep on relocating and moving towards essentially a larger port that’s a continuous journey. So yes, it will keep on going, but I don’t see that as a big drag on our overall square feet area in the future. Is it done? No, that journey will actually continue, but it’s not going to be a big drag on earth of its cost in general.
Abhisek Banerjee
Understood. Now if, if we are, you know, looking at the order, you know, the, the ordering frequency per customer, obviously there, there has been a later wrap up, but can you give us some idea of what is, you know, average number of days that the 96 stores have done in the quarter?
Amitesh Jha
Sorry, I didn’t understand the question. You just repeat the.
Abhisek Banerjee
What would be the blended average number of days that the new 96 stores have done in this quarter?
Amitesh Jha
I don’t think we can answer that question specifically, but if there is any other question related to that that we can get, we can, we can continue on that. All we can say is that the store editions were slightly back ended because that’s something that.
Sriharsha Majety
Amitesh had already mentioned, which is why obviously you see drag on the same while the overall numbers gone up by 96, but they’ve obviously been slightly more back ended.
Abhisek Banerjee
Okay, thanks. Now if I come to your, you know, the KPIs which say the customer sees for example, say the difference between the time shown as it. I mean, so when say somebody places an order, you show say 15 minutes for delivery. And what is the actual time of, you know, that order being delivered? Is there some, you know, metrics you can share on that which, which kind of explains how you are doing operationally?
Amitesh Jha
Yeah, I will take the Insomat question. But you know, Rohit can speak about food as well. So in terms of promise SLA that we track very, very closely because that is something that, you know, customer sees. We are the industry best. It has been also seen in some of the benchmark studies as well. We continue to improve on that as well. And that will always be one of the, you know, top priorities that we are essentially looking for.
The other thing is that our, the delivery times will be considered to that particular UNSLA is also extremely close. So we also ensure that the promises that we are doing to the consumer and the actual SLA that we are also having is also extremely close. At a national essentially level, our average in terms of actual SLA is around 12 minutes. And we see that essentially going south as well as. And more the orders will essentially be more denser. So more dense orders essentially mean that my SRL will eventually go down. If that question was specific to Samad. But.
Abhisek Banerjee
Yeah, and one more part which is that what is the promised.
Rohit Kapoor
Sorry Abhishek, please go on.
Abhisek Banerjee
So I, I was just trying to understand what is the promised time for delivery in instamar visa vis a 12 minute of actual delivery time.
Amitesh Jha
Yeah, so Primus will be extremely close to that. It’s not, it’s not going to be.
Rohit Kapoor
Yeah, sure, maybe I take that this Rohit here, I think on both food and Instamart in terms of. From our understanding we operate at near industry based standards on the promise versus actual gap. And the promise will be actually in most cases within a very tight range. Maybe you know, Instamart maybe one or two minutes in food, maybe two to five minutes in that range. Right. So and that’s a very important metric because I think we don’t think of the consumer response as a one shot response where you show something and the actual in that particular episode. But trust builds over a period of time. And so this is a very important metric. We crack regularly and the range is very tight is what I tell.
Abhisek Banerjee
Understood, understood.
Rohit Kapoor
And is there a, Is there a very aggressive time being shown and the delivery something else that’s incorrect.
Abhisek Banerjee
Yeah, yeah, exactly. So I was just trying to understand, you know, how you stand versus the overall industry. If there’s any way of tracking that.
Rohit Kapoor
Sorry, say that again.
Abhisek Banerjee
So is there any way of compliance?
Rohit Kapoor
We track compliance and we do mystery ordering reports which are third party in nature where third parties actually studied across players and come back and give us a range of guidance. So this is a very closely watched metric at the management level. IEI track it, Harsha tracks it, Anita tracks it. So the very important metric we track and our philosophy is to keep the promised versus actual quite tight.
Abhisek Banerjee
Okay, fair enough. And in terms of.
Operator
We request you to please rejoin to the next participant as well. Thank you. Ladies and gentlemen, due to time constraints, we request you to please restrict yourselves to one question per participant. We have the next question from the line of Samartha Patel from Equitas Securities. Please go ahead.
Samarth Patel
Thanks for providing me the opportunity. Now on the quick commerce side, there has been significant increase in fixed cost, both like semi fixed cost as well as overall fixed cost X of marketing. Right. So how much of it would be, let’s say A, we are replacing existing dark stores with the larger dark stores. B, we are opening dark stores but within existing city. And the third, we are just opening the new city. So any flavor on that would be really helpful.
Rahul Bothra
So we unfortunately cannot give, you know, specific information in this cut.
Samarth Patel
Yes. but any like flavor would be really helpful for us to understand.
Rahul Bothra
Yeah. See the largest component in, you know, below contribution margin cost is the marketing investment. Right. Which are slightly more discretionary nature which we decide to invest or you know, hold back depending on the category growth that we see.
Samarth Patel
Okay. Yes, thank you for answering.
Operator
Thank you. The next question is from the line of Gaurav Malhotra from Access Capital. Please go ahead.
Gaurav Malhotra
Thank you for taking in my question again. I just had one question right now from an industry perspective, everyone is really going out and aggressively expanding and also providing reasonable discounting in terms of gaining subscriber share, but what is the risk that, you know, at least in some of the, some markets, we are sort of overestimating the demand because that demand is basically coming from, you know, providing higher discounting of products. Any thoughts on that?
Amitesh Jha
Yeah, I will speak about the market in general and I think which is the, you know, essentially question around this as well. See, everyone is expanding. We are also expanding and we are seeing a latent demand for quick commerce across the city. So wherever we are going, and I think this is one of the standard metrics also that we look at is that how long does it take for a store to essentially mature. The trajectory for any new store that we are launching in new cities are also following the same trajectory.
So the way to look about it is that it really, if you are comparing a Metro to a T2 city, every store, even at this particular point of time, are behaving in the exact same way. So the way to think about it is there is a latent demand. It is important for the quick commerce place to go and serve that demand. We want to be in the forefront of that, which is the reason why we are investing in expansion of stores, cities as well as onto marketing. And we believe that particular thing will be placed. There is a big reason of why people are essentially coming in is because they essentially want it.
Gaurav Malhotra
Okay, all right, thank you.
Operator
Thank you ladies and gentlemen. We will now take one last question which will be from the line of Ankur Rudra from JP Morgan. Please go ahead.
Ankur Rudra
Thank you. Thanks for the follow up question. Just one question on the subsidies you mentioned that that’s sort of gone up. Could you maybe clarify what is the nature of the customer incentives that is happening in the market right now, especially from your side?
Are these headline subsidies on the MRP from your side as OPP to what you get from brands, or is this targeted for customer acquisition or reacquisition for the first few orders? Is it on delivery charges? It’s just some clarity on what’s happening there. Because the concern I have is is this potentially changing the customer perception to a very, very subsidy seeking behavior which could be harmful for your brand in the market in the long term.
Amitesh Jha
Yeah. See the way we are looking at is that there is a customer acquisition cost that we have to pay. We’ll have to do marketing and we have to make sure that they have the right tools in place for them to be sticky to a platform. And that stickiness to a platform is a program that we essentially run. That is the same program that we used to run also earlier, and we are also doing that essentially right now. So the way to think about it is the more number of new customers you acquire, the amount of investment spent on those programs will essentially go up the customer acquisition cost obviously because of heightened completion is also up. But as they mature generally these customers are becoming more and more productive.
One thing that we track very closely that exactly what you said, that is the customer behavior changing because of the way we are acquiring those. We don’t see any kind of change in that essentially at all. We see that when we do it over a longer period of time that stickiness remains and the propensity to higher retention, higher gov only increases. We haven’t seen essentially correlation between the customer acquisition cost that we are essentially providing and the retention generally they are independent of each other.
Ankur Rudra
Thank you. Just want to clarify this is the point about excluding a performance marketing. What’s spend on customer acquisition outside of performance marketing?
Amitesh Jha
Yeah. We look at it very together because ultimately it’s a full customer acquisition cost. The perf is for acquiring a customer and the incentive are also related to that. So integrated cost is what we essentially look at.
Ankur Rudra
Understood. Thank you so much.
Operator
Thank you on behalf of Swiggy Limited that concludes this conference. Thank you all for joining us. You may now disconnect your lines.