Why Rapido Exit and Instamart Slump Sale Matter for Swiggy – Explained

Swiggy is shaking up its food delivery and quick commerce games during the festive season sale time. The food tech giant has taken two major decisions: one, sale of its 12% stake in ride-hailing start-up Rapido to Prosus and Westbridge; and second, sale and transfer of its quick commerce arm ‘Instamart’ via a slump sale, which means Swiggy will hive off Instamart into a separate subsidiary.

Prosus bought shares ₹1,968 crore in Rapido, while Westbridge bought the remaining part worth ₹431.49 crore, the company revealed in an exchange filing. Swiggy has gained nearly 2.5x times from its 2022 investment worth ₹950 crore from Rapido.

While the Rapido stake sale has delivered a significant return, Swiggy’s simultaneous decision to transfer its Instamart business via a slump sale highlights its focus on streamlining operations, enhancing transparency, and ensuring full ownership with the listed parent company. Swiggy will also receive a lump-sum cash consideration from the subsidiary once the transfer is completed in the third quarter of FY26.

These moves may look like routine portfolio adjustments, but they will actually raise the cash balances of Swiggy and gives it enough financial resource to weather the current burn phase of its 10-minute delivery game. By selling its Rapido stake, Swiggy will raise ₹2,400 crore.

Swiggy Needs Capital

Coincidentally, the announcement came a day after brokerage firm JM Financial warned that Swiggy faces an urgent funding shortfall driven by rapid cash burn and heavy losses at Instamart. It even stated that the Rapido stake sale amount seems “insufficient” for the food delivery platform.

It explicitly recommended management to consider raising more than $500 million to create meaningful capital buffer and support Instamart’s expansion without being forced to sell from a position of weakness.

“….a fresh fund-raise at a later stage may become difficult if Swiggy ends up depleting its balance sheet at an accelerated pace either on account of operational challenges and/or sudden rise in competitive intensity,” the brokerage firm said, while downgrading the foodtech major to “Reduce” and placing a ₹440 12-month target on the stock, downside from then-current market levels.

Its analysts also said that Swiggy’s net cash (excluding any Rapido divestment proceeds) was forecast to fall to roughly ₹43.5 billion by September 2025, with quarterly cash outflows running at about ₹10 billion.

JM Financial further estimated that Swiggy’s cash outflow will remain high at least till late-FY27 because Instamart’s adjusted EBITDA losses are not likely to come down at an accelerated pace due to various reasons.

These include if it turns contribution margin break-even as per the management’s latest guidance, new dark store addition remains muted at approximately 40-50 per quarter (from a peak of 316 stores in 4Q FY25), and competitive pressure remains relatively modest.

Growth Opportunity Amidst Pressure

As Swiggy has approved the slump sale of Instamart, brokerage firm Nomura believes that the restructuring is a step in the direction of enabling the quick commerce arm to own inventory in its own business once Swiggy becomes an Indian Owned and Controlled Company (IOCC) when its domestic shareholding crosses 51%.

According to Nomura, the market is valuing the company’s quick commerce business quite low at the current level, at about 0.3 times its total sales value (EV/GOV). This is much lower than a competitor, Eternal, which is valued at about 0.9 times its sales.

“Switching to an inventory-led model can help improve the contribution margin of Swiggy’s Instamart business as Eternal expects around 100bp improvement from the same,” Nomura wrote in its recent report. It is pertinent to note that Eternal, Zomato parent, had also announced a change of business model for its quick commerce subsidiary (Blinkit) recently when it became an IOCC.

The brokerage maintains its “Buy” rating, with a SOTP-based target price of ₹550 for Swiggy. It stated that disciplined execution and improving visibility on breakeven will be a key catalyst for the stock to do well from this point. However, it has also listed some risks to its own predictions.

“Key risks to our call – an increase in competition in the QC business due to aggressive expansion by other players could delay the company’s path to profitability and macro slowdown could also pose a risk to our growth assumptions for the online FD business of Swiggy,” it added.