Swiggy has crossed an important milestone in its corporate restructuring after domestic ownership in the company went above 50%. However, the food delivery and quick commerce company still has one major challenge to overcome before it can fully benefit from India’s foreign investment rules.
The company recently informed stock exchanges that its total foreign investment has dropped to 49.76% on a fully diluted basis. This means Indian investors now own 50.24% of the company. While this is a significant achievement, Swiggy has clarified that it does not automatically become an Indian Owned and Controlled Company (IOCC). The company must also meet another important condition related to management control.
Why IOCC Status Matters for Swiggy
Getting IOCC status is important because it could change the way Swiggy’s quick commerce business, Instamart, operates.
Under India’s Foreign Direct Investment (FDI) rules, companies with high foreign ownership must work only as online marketplaces. They cannot directly own the products they sell or have too much control over pricing.
If Swiggy gets IOCC status, Instamart can shift to an inventory-led business model. This means the company will be able to buy products directly from brands, manage its own inventory, record the full value of product sales as revenue, and improve its supply chain. This could also help the company improve its profit margins in the long run.
To qualify as an IOCC, a company must meet two conditions. First, more than 50% of its ownership must be with Indian residents or Indian companies. Second, the company’s board and management must also remain under Indian control.
Swiggy has now completed the first requirement by reducing foreign ownership below 50%. Before its IPO in November 2024, foreign investors owned nearly 88% of the company. After the latest announcement, Swiggy’s share price rose by around 6% to 7%, showing positive investor sentiment.
However, the company has clearly said that there has been no change in its board structure, management control or voting rights.
Shareholders Reject Board Control Proposal
Although Swiggy has crossed the ownership requirement, it has not yet cleared the management control requirement.
To achieve this, the company proposed changes to its Articles of Association through a postal ballot. The proposal aimed to remove board nomination rights held by some foreign investors and give nomination rights to CEO Sriharsha Majety and Co-founder Phani Kishan Addepalli under certain conditions.
The proposal needed support from at least 75% of shareholders because it was a special resolution. However, it received only 72.36% approval and failed to pass.
The voting showed a clear difference between institutional and retail investors. Most institutional investors voted against the proposal, while retail and public shareholders strongly supported it.
Many institutional investors were unhappy because several governance changes were included in one single resolution. This meant shareholders could not vote separately on different proposals. Some investors also raised concerns about giving board nomination rights based on relatively small shareholding requirements, especially when some of those shares were linked to unexercised employee stock options.
As the proposal failed, the planned board appointments linked to these changes did not happen. However, shareholders did approve the appointment of another nominee director representing an existing investor through a separate resolution.
Swiggy Plans to Try Again
Swiggy has said it will try again after discussing the concerns raised by shareholders.
Group CEO Sriharsha Majety said the issue was mainly due to a lack of communication with investors and not because of governance problems. The company believes it can secure shareholder approval after providing more clarity.
Swiggy has also explained that the proposed board rights were not permanent. According to the company, the changes would not have given founders veto powers, majority board control or special voting rights. Any future board appointments would still need approval from the Nomination and Remuneration Committee as well as shareholders.
Along with this, Swiggy is reportedly planning to raise around ₹10,000 crore through a Qualified Institutions Placement (QIP) to support its future growth.
The company is under pressure to complete this transition because competition in India’s quick commerce market is becoming stronger. While Swiggy’s food delivery business continues to perform well, Instamart still requires heavy investments. The company has also slowed the expansion of new dark stores as it focuses on improving profitability.
Meanwhile, rival Eternal, formerly known as Zomato, has already reduced its foreign ownership below the required limit, allowing Blinkit to operate under an inventory-led model. Other quick commerce companies have also adopted business structures that provide greater flexibility, increasing pressure on Swiggy to complete its own restructuring.
Swiggy’s efforts are also part of a larger trend where Indian startups are bringing their corporate structures back to India to benefit from local regulations and public markets. Although the process offers long-term advantages, it can involve significant tax costs and complex restructuring.
For now, Swiggy has completed the ownership requirement but still needs to meet the management control condition. Its next attempt to gain shareholder approval could decide how quickly Instamart moves to an inventory-led model and strengthens its position in India’s fast-growing quick commerce market.