CLSA Takes 25-Year View To Justify Lofty India Quick Commerce App Valuations

Indian food delivery app Swiggy is being valued using 25-year cash flow projections by CLSA, as the investment bank attempts to justify valuations for loss-making quick commerce companies amid rapid sector growth.

The bank, which raised its target price for Swiggy to Rs750 ($8.67) from Rs708, is using discounted cash flow models that extend to 2050 -- an unusually long timeframe that reflects what it calls India's "low penetration levels, rising incomes and young population."

The aggressive valuation comes despite Swiggy being expected to lose Rs21.9 billion ($253 million) in fiscal 2025 and not turning profitable until 2027. CLSA values the company's quick commerce unit at 57 times earnings -- just a 15% discount to profitable brick-and-mortar retailer DMart.

CLSA projects Swiggy's addressable market will reach $43 billion by 2027, split between food delivery and quick commerce. The company's current gross order value across both segments is $7 billion.

The bank's analysts are applying a 14.4% cost of capital and 4% terminal growth rate beyond their quarter-century projections -- assumptions that highlight the challenges of valuing high-growth, unprofitable technology companies in emerging markets.