The development could pave the way for Swiggy to operate its quick-commerce business, Instamart, under an inventory-led or first-party (1P) model.
Brokerage firm Jefferies has a ‘Buy’ rating on Swiggy with a price target of ₹435 per share, saying the latest shareholder approval moves the company a step closer to completing its IOCC transition.
At its August 18 annual general meeting (AGM), Swiggy shareholders approved a special resolution to amend the company’s Articles of Association (AoA), with 93.97% of votes cast in favour. The same proposal had secured only 72.36% support in May, falling short of the 75% threshold required to pass a special resolution.
Shareholders also approved a separate resolution to cap aggregate foreign ownership in Swiggy at 49.5% on a fully diluted basis, with 99.9996% of votes in favour.
The approvals are central to Swiggy’s renewed push to secure IOCC status. The company can now approach the Reserve Bank of India for approval of the foreign ownership ceiling, following which it can work towards transitioning Instamart to an inventory-led model.
Jefferies said the proposed 1P model at Instamart could drive around 80 basis points of margin upside.
However, the brokerage flagged a potential near-term overhang from passive fund flows once the new foreign ownership framework is implemented.
As of early August, Swiggy’s domestic ownership stood at 50.5%, while foreign ownership was at 49.5%, effectively leaving little headroom under the proposed cap.
Jefferies said that stocks with a foreign ownership cap enter the red-flag list when FPI ownership is within three percentage points of the maximum permissible limit. For Swiggy, this threshold would be 46.5%.
If the FPI limit is breached, foreign investors would have to divest their excess holdings within five trading days from the date of settlement, with the excess shares being sold only to domestic investors.
Once the resulting decline in foreign ownership is reflected in the depositories, benchmarks are likely to exclude the stock within two to three business days, according to Jefferies.
“In such a scenario, Swiggy could see passive outflows of over $400 million from MSCI and FTSE indices, in our view,” the brokerage said.
Jefferies expects the implementation process to move relatively quickly following the shareholder approval. The process will involve notifying the depositories, which will then initiate the necessary changes, and could take two to three weeks, according to the brokerage.
The brokerage added that Swiggy has already begun the operational groundwork, which should allow for a seamless transition once the required approvals and implementation steps are completed.
