Swiggy is going through an important phase as it tries to strengthen its position in India’s fast-growing quick commerce market. The food delivery and grocery platform recently crossed a major ownership milestone needed to become an Indian-Owned and Controlled Company (IOCC). However, the company is still facing several challenges, including investor concerns, rising losses, strong competition and the need for fresh funding.
Recently, Swiggy announced that resident Indian ownership has increased to 50.24%, while total foreign ownership has fallen to 49.76%. After this announcement, the company’s shares gained around 6% to 7% in early trading.
This ownership change is important because it brings Swiggy closer to getting IOCC status under the Foreign Exchange Management Act (FEMA). Once it gets this status, Swiggy’s quick commerce business, Instamart, can move from a marketplace model to an inventory-led model. This would give the company more control over its operations and could help improve profit margins in the future.
Shareholder Vote Delays the IOCC Process
Although Swiggy has crossed the required ownership mark, its IOCC journey is not complete yet.
Earlier this year, the company asked shareholders to approve changes to its Articles of Association (AoA). These changes were considered necessary to complete the IOCC transition.
However, the proposal received only 72.36% shareholder support, which was below the required 75% needed for approval. Another related resolution was approved with nearly 99% support, but the main proposal failed.
The rejected proposal would have allowed founder and CEO Sriharsha Majety to nominate co-founder Phani Kishan Addepalli and Chief Financial Officer Rahul Bothra to the company’s board.
After some investors raised concerns, Swiggy clarified that the proposed changes would not give founders permanent board seats, veto powers or control over the majority of directors. The company also said that it remains a professionally managed business and does not have any promoter group.
At present, Swiggy’s board has four independent directors, one executive director and two nominee directors. The company also appointed Renan De Castro Alves Pinto as a director earlier this year.
Because the proposal did not receive enough votes, analysts believe Swiggy’s move to become an IOCC could take longer than expected.
JM Financial Raises Concerns Over Swiggy’s Future
The delay comes at a time when Swiggy is already under financial pressure.
Brokerage firm JM Financial has downgraded the stock to a “Reduce” rating and lowered its target price for 2027 to ₹250-270.
The brokerage also gave zero value to Instamart and Swiggy’s other new businesses, saying that continued losses, high cash burn and increasing competition could hurt the company’s value for a longer period.
According to JM Financial, Swiggy may need to raise more than $500 million to continue competing in the quick commerce market. The brokerage even suggested that a takeover by a larger internet or e-commerce company could become the best outcome for investors if the current situation continues.
To improve its cash position, Swiggy is selling its entire 12% stake in ride-hailing platform Rapido. The deal is expected to bring in around ₹2,500 crore and give the company a strong return on its investment made in 2022.
Even with financial pressure, Swiggy is continuing to invest in Instamart. The company plans to invest ₹1,179 crore and increase its network to 741 dark stores, showing that it is still focused on expanding its quick commerce business.
Competition in Quick Commerce Is Becoming Tougher
Swiggy is facing strong competition from both existing and new players.
Blinkit has continued to report strong growth with a larger dark store network, higher order value and positive EBITDA. It also has a much stronger cash position, giving it an advantage in the market.
Competition is expected to become even tougher as Tata Group prepares to launch its quick commerce brand, while Flipkart is rapidly expanding its quick delivery service across India.
At the same time, Swiggy is expected to benefit from its inclusion in major global stock market indices, which could bring fresh foreign investments into the company.
However, there is also a challenge. To keep its IOCC status, Swiggy may have to maintain foreign ownership below 50%. If foreign investors have limited room to buy shares, global index providers could reduce the company’s weight in their indices, which may affect future passive investment inflows.
Apart from business challenges, Swiggy is also dealing with a few regulatory matters, including an ongoing competition law investigation, older provident fund compliance issues and notices related to electric vehicle fleet targets.
With rising competition, increasing investment needs and the delayed IOCC process, the next few months will be important for Swiggy. The company’s ability to raise funds, expand Instamart and complete its IOCC transition will play a major role in shaping its future growth.