Swiggy's Rapido stake sale to boost cash kitty, but concerns remain

Swiggy made two important announcements on September 23. In April 2022, Swiggy had acquired a 12 per cent stake in Rapido (unlisted) for 1,000 crore and it announced that it has sold that 12 per cent stake in Rapido to Prosus and Westbridge to raise ₹2,400 crore.

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This monetisation raises the cash balances of Swiggy and gives it financial resources to continue to invest in its quick commerce (qcom) Instamart business. Subject to shareholder approval, Swiggy has also approved the sale and transfer of Instamart to Swiggy Instamart Private Limited, an indirect step-down wholly-owned subsidiary, incorporated in India. Instamart is currently held directly in the parent listed company, Swiggy.

This restructuring may help enable Instamart to own inventory as and when Swiggy becomes an Indian Owned and Controlled Company (IOCC) with a domestic shareholding above 51 per cent. It could mirror Eternal's change of business model for Blinkit recently, when it became an IOCC. Switching to an inventoryled model can improve the contribution margin of the Instamart business - Eternal has guided for 100bp improvement from the Blinkit restructuring.