Swiggy’s Future: JM Financial Maintains Reduce Rating

Swiggy, the food and grocery delivery service, is closely watched as JM Financial keeps its ‘Reduce’ rating with a consistent 12-month target price of Rs 250. This decision is based on the anticipated challenges in Swiggy’s transformation into an Indian-Owned-and-Controlled Company (IOCC), despite its foreign ownership dropping below the critical 50% level.

Foreign Shareholding at a Historic Low

As of July 6, Swiggy’s overall foreign shareholding has decreased to 49.76%, marking the first instance that it has dipped below the 50% threshold. However, this reduction alone does not automatically classify the company as an IOCC according to FEMA regulations.

Governance Changes Required for IOCC Status

According to JM Financial, Swiggy must undertake several governance-related modifications to prove that ownership and control resides with Indian citizens or entities. This may necessitate an overhaul of the board, adjustments to voting rights, and the securing of shareholder consent.

Evaluation of IOCC Eligibility

The evaluation for IOCC status is based on ownership and control data by March 31 of the prior financial year. Thus, even if Swiggy implements the necessary governance changes in the near term, it is unlikely to secure IOCC designation before the end of March 2027. This delay may push Instamart’s shift to an inventory-led model to April 2027 at the earliest.

Benefits of an Inventory-Led Model

JM Financial highlighted that transitioning to an inventory-led model would enable Instamart to source directly from brands, broaden product offerings, launch private labels, and negotiate improved commercial terms. Management previously indicated that this transformation could enhance adjusted EBITDA margins by 50–70 basis points.

Concerns Over Foreign Ownership Cap

There are additional concerns regarding maintaining foreign ownership below the 50% mark. JM Financial cautioned that this cap could diminish Swiggy’s representation in global indices. The firm cited the case of Eternal, whose index weight was reduced by MSCI after imposing a foreign ownership limit of 49.5% in May 2025, only to be reinstated in February 2026.

Valuation Insights

JM Financial has upheld its target price of Rs 250, attributing a valuation of 35 times adjusted EBITDA to Swiggy’s food delivery division and 25 times EV/adjusted EBITDA to its out-of-home segment, Dineout. Notably, the firm continues to assign no value to Instamart and its associated supply chain and platform innovations due to unclear profitability prospects. The firm’s assessment also excluded Swiggy’s cash reserves of approximately Rs 1,500 crore, citing that ongoing losses could slowly deplete these reserves.

At 2:07 PM today, Swiggy’s stock was trading around Rs 263 on the NSE, boasting a total market capitalisation of Rs 72,665 crore.