Swiggy shares decline after Rapido stake sale to fetch nearly ₹2,500 crore

Shares of Swiggy Ltd. declined on Wednesday, September 24, after the company said its board of directors approved the stake sale in cab aggregator Rapido to Setu AIF Trust and / or its affiliates, along with MIH Investments One B.V., a company incorporated in the Netherlands.

Swiggy will be divesting its entire 11.8% stake in Rapido through this sale. It will sell 10 equity shares and 1,63,990 Series D Compulsorily Convertible Preference Shares (CCPS) in Rapido to MIH Investments One B.V for ₹1,968 crore.

Additionally, it will be selling 35,958 Series D CCPS of Rapido to Setu AIF Trust (Westbridge) for ₹430 crore.

The stake sale is in line with what the company had guided for at the end of the June quarter.



On another note, Swiggy's board on Tuesday also approved the sale and transfer of its quick-commerce business Instamart to Swiggy Instamart Pvt Ltd., an indirect step-down wholly-owned subsidiary via a slump sale.

On Monday, brokerage firm JM Financial downgraded the Swiggy stock

to "reduce" from "hold" and marginally trimmed its target price to ₹420 apiece, saying the company's balance sheet remained a cause of concern and required remedial measures.

Its remarks came in the light of media reports that suggested Swiggy was considering selling its 12% stake in Rapido to recapitalise its balance sheet.

JM Financial said that Swiggy needed a much bigger war chest. It also reiterated that the food delivery aggregator required a much larger fund raise of over $500 million to support its long-term ambitions in quick commerce.

The brokerage said at a time when Swiggy is fast depleting its cash balance among growing competitive threats, it needs to take cues from its larger peer, which recapitalised itself last year despite no visible signs of balance sheet concerns.

JM Financial said even though Instamart delivered 100% gross order value growth in the recent quarters compared to the previous years, it has been losing relative share to its competitor Blinkit as the latter expanded by over 130%.

Swiggy has reported widening losses for five-straight quarters, with net losses of ₹2,278 crore in the last quarters. Over the previous nine quarters, the company's cumulative losses have crossed ₹6,600 crore, JM Financial stated.

Swiggy shares were down 0.6% at ₹446.55 apiece around 9.20 am on Wednesday. The stock has gained 27.2% in the last six months but has declined 17.5% this year, so far.

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