Why Does JM Financial Expect Swiggy’s IOCC Transition to Take Longer?
Brokerage firm JM Financial has reiterated its ‘Reduce’ rating on Swiggy, retaining a 12-month target price of ₹250, while cautioning that the company’s transition to an Indian Owned and Controlled Company (IOCC) is likely to take longer than previously anticipated.
The brokerage noted that although Swiggy’s aggregate foreign shareholding declined to 49.76% as of July 6, falling below the critical 50% threshold for the first time, this alone is not sufficient to qualify the company as an IOCC under the Foreign Exchange Management Act (FEMA) regulations.
According to JM Financial, Swiggy must also demonstrate that both ownership and effective control rest with resident Indian citizens or Indian owned entities before it can obtain IOCC status. Until then, several strategic initiatives including changes to Instamart’s operating model could remain on hold.
What Additional Steps Must Swiggy Complete?
The brokerage explained that becoming an IOCC involves much more than reducing foreign ownership.
Swiggy will also need to implement a series of governance related changes, including restructuring its board, revising voting rights where required, and obtaining shareholder approvals to ensure that control of the company complies with FEMA regulations.
JM Financial further pointed out that IOCC eligibility is generally assessed based on the company’s ownership and control structure as of March 31 of the previous financial year.
As a result, even if Swiggy completes the required governance changes over the coming months, the brokerage believes the company is unlikely to qualify as an IOCC before the end of March 2027. Consequently, any operational benefits linked to this transition may not materialise before April 2027.
Why Is IOCC Status Important for Instamart?
According to JM Financial, achieving IOCC status would allow Instamart, Swiggy’s quick commerce business, to transition to an inventory led model.
Such a model would enable Instamart to purchase products directly from brands instead of relying primarily on marketplace arrangements. This could significantly improve business economics by allowing the company to:
- Procure directly from manufacturers
- Expand its product assortment
- Launch private-label products
- Negotiate better commercial terms with suppliers
- Improve operational efficiency
Swiggy’s management has previously indicated that shifting to an inventory led model could improve adjusted EBITDA margins by around 50–70 basis points, making IOCC approval strategically important for the business.
What Other Concerns Has JM Financial Highlighted?
Apart from the delay in obtaining IOCC status, JM Financial also raised concerns about the impact of maintaining foreign ownership below 50%.
The brokerage warned that limiting foreign shareholding without providing sufficient headroom for overseas investors could reduce Swiggy’s representation in global equity indices.
It cited the example of Eternal, whose weight in the MSCI index was reduced after capping foreign ownership at 49.5% in May 2025 before being restored in February 2026.
A lower index weight could potentially reduce passive institutional inflows into Swiggy’s stock, affecting demand from global funds that track benchmark indices.
How Does JM Financial Value Swiggy?
Despite maintaining its target price of ₹250, JM Financial adopted a conservative valuation approach.
The brokerage valued Swiggy’s food delivery business at 35x adjusted EBITDA, while assigning a valuation of 25x EV/adjusted EBITDA to its Dineout business.
However, it assigned zero value to several of Swiggy’s other businesses, including:
- Instamart
- Supply chain operations
- Platform innovation initiatives
The brokerage said profitability in these segments remains uncertain, making it difficult to assign meaningful valuations at this stage.
JM Financial also excluded Swiggy’s cash balance of around ₹1,500 crore from its valuation, arguing that continued operating losses would gradually reduce these reserves over time.
What Does This Mean for Investors?
Swiggy’s fall in foreign shareholding below 50% represents an important milestone, but JM Financial believes the company still faces a lengthy regulatory and governance process before securing IOCC status.
Until then, the anticipated operational benefits for Instamart including improved procurement economics and higher margins may remain delayed.
At the same time, concerns around valuation, profitability, and potential changes in global index weight continue to shape the brokerage’s cautious outlook.
As of 2:07 PM, Swiggy shares were trading at around ₹263 on the NSE, giving the company a market capitalisation of approximately ₹72,665 crore.
