Swiggy Divests Stake in Rapido for Rs 2,399.5 Crore

Swiggy has undertaken the sale of its investment in Rapido for Rs 1,968 crore to MIH Investments One B.V., part of the Prosus group located in the Netherlands, and Rs 431.5 crore to Setu AIF Trust alongside its affiliate WestBridge. Consequently, the foodtech giant has garnered Rs 2,399.5 crore, which translates to over a 2.3X return on its investment made just under four years ago.

Details of the Transaction

The transaction encompasses the conveyance of 10 equity shares along with 1,99,948 Series D Compulsorily Convertible Preference Shares owned by Swiggy in Roppen Transportation Services Private Limited, the parent entity of Rapido. In 2022, Swiggy invested around $120 million (approximately Rs 1,020 crore) in Rapido, holding a 12% ownership in the company. Notably, WestBridge, which acquired Swiggy’s investment in Rapido, is now the largest stakeholder in the company.

Strategic Implications of the Divestment

This divestment constitutes a strategic initiative by Swiggy to unlock investment value for the benefit of the company and its shareholders. The transaction is contingent upon standard conditions, which include authorisations from the Competition Commission of India and Swiggy’s shareholders.

Swiggy’s Portfolio Optimisation

This move occurs as Swiggy seeks to refine its portfolio amidst rising competition and financial strains, while Rapido continues its growth trajectory, recently foraying into the food delivery sector. Swiggy’s choice to liquidate its stake appears primarily designed to mitigate potential conflicts of interest.

Transfer of Quick Commerce Business

Simultaneously, the Swiggy board has sanctioned the sale and transition of its quick commerce division, Instamart, to Swiggy Instamart Private Limited, an indirectly wholly owned subsidiary, through a slump sale. Swiggy asserts that this action will establish a focused and strategically aligned entity for Instamart’s future growth.

Cash Payment Structure

The consideration for this transfer will involve a one-time cash payment based on the asset and liability book values as of the effective date. Swiggy’s strategy mirrors that of Zomato, which operates Blinkit as a distinct subsidiary competing directly with Instamart in the quick commerce space. This separation grants Swiggy enhanced focus, flexibility, and potential for future fundraising in this capital-intensive sector.

Funding Needs for Future Growth

Recently, JM Financial advised that Swiggy should consider raising at least $500 million (approximately Rs 4,400 crore) to fuel its growth and mitigate liquidity challenges. The brokerage warned that postponing this funding effort could pose difficulties if operational or competitive hurdles further threaten the balance sheet.