Swiggy Ltd’s large ₹10,000 crore qualified institutional placement (QIP) comes barely a year after its initial public offering (IPO). For investors, this appears to be a message that the company is eager for capital.
Swiggy had raised about ₹4,500 crore during its IPO in November 2024. Now, within 13 months, the company is back for another ₹10,000 crore, and at a price floor of ₹390.50 per share vis-à-vis Thursday’s closing price of ₹401.20. With nearly 270 million new shares being issued, existing shareholders face almost 10% dilution in a single year. Long-term investors love compounding, but equity dilution eats into the gains.
Why does Swiggy need more money?
Upon examining the financials, the reason becomes clear. While Swiggy’s revenue for the half-year ending September (H1FY26) increased 54% year-on-year to ₹10,522 crore, it reported a net loss of ₹2,289 crore. Moreover, Swiggy has burned a lot of cash over the years, with cumulative negative operating cash flow of ₹7,542 crore between FY23 and FY25.
Swiggy needs money not only for survival, but also to stay competitive in an increasingly crowded and cut-throat market. While Zomato is putting continuous pressure on Swiggy’s food delivery business, competition in the quick-commerce sector is heating up with Blinkit and Zepto growing aggressively.
A large part of the QIP money of around ₹4,475 crore is allocated for the expansion of Swiggy’s quick-commerce fulfilment network, including dark stores and warehouses. The goal is to expand the fulfilment footprint significantly over the next few years to support faster deliveries and wider coverage. It is planning to spend ₹2,300 crore on marketing and brand building over the next two years. This is aimed at driving customer acquisition, increasing average order values, and competing more aggressively with rivals like Zepto and Blinkit. The remaining amount will be used for technology improvements and potential inorganic growth opportunities.
Swiggy’s growth over the next few years is expected to remain strong, driven by continued expansion in both food delivery and quick commerce and earnings growth potentially above revenue expansion is supported by rising user traction, wider geographic reach, and strong Instamart adoption.
“While competition of late has increased in the quick-commerce space, we consider this as a temporary phase and see competition normalizing given capital-intensive nature, limited share gains for late entrants given me-too offering, and unsustainable discounts given mounting losses,” said Bank of America in the 10 December report.
Also, management expects quick commerce to turn contribution-margin positive by mid-2026, which is an important step toward reducing losses. But, for Swiggy to become fully profitable, it will need to consistently execute well, improve margins, and keep driving cost efficiencies as the business scales.
Valuation looks stretched
Swiggy currently trades at about 3.43 times its FY27 estimated sales. It still continues to burn cash, and there’s a possibility that it may have to raise more funds in the future, leading to more dilution. Thus, valuations look expensive.
