Swiggy, the Indian food delivery giant, has recently undertaken a significant strategic move by selling its 12% stake in the ride-sharing company Rapido. This decision, finalized in July, comes three years after Swiggy's initial $180 million investment in Rapido in 2022. The sale serves a dual purpose: it strategically eliminates a potential conflict of interest as Rapido began to venture into food delivery, and it provides Swiggy with a substantial cash infusion at a time when its quick commerce business, Instamart, continues to incur considerable expenses.

The impending deal, as reported by Mint, involves Dutch firm Prosus NV potentially acquiring a large portion of Swiggy's Rapido stake. This transaction could value Rapido at an estimated $2.5-2.7 billion, thereby pegging Swiggy's sold stake at approximately $320 million, or ₹2,825 crore. This capital gain is crucial for Swiggy, particularly given its recent financial trajectory.

Swiggy became India's second publicly listed food delivery company after its initial public offering in November 2024, raising ₹4,359 crore. However, its cash reserves have experienced a notable decline, falling from ₹8,183 crore at the end of December to ₹5,354 crore by the close of the June quarter. Simultaneously, the company's burn rate—the speed at which it expends cash—has escalated, reaching ₹1,053 crore in the June quarter. At this current rate, Swiggy risks depleting its cash reserves within four to five quarters unless additional funds are secured.

Despite these challenges, Swiggy maintains a confident outlook, asserting its balance sheet is strong. The company anticipates that its core food delivery and dine-out operations will soon achieve profitability. Crucially, Swiggy projects its quick commerce arm, Instamart, which is the primary driver of its cash burn, to turn profitable by June 2026. Currently, for every ₹100 earned, Swiggy reports a loss of ₹24, though it claims its losses have peaked. The profitability of Instamart remains a critical factor for its long-term financial stability.

The sale of the Rapido stake significantly bolsters Swiggy's financial position. Should the deal proceed, Swiggy's cash reserves are expected to reach approximately ₹8,179 crore. This increased liquidity is vital for Swiggy to effectively compete against well-funded rivals in the Indian market, including Zomato, privately held Zepto, and Tata-backed BigBasket, all of whom possess substantial financial resources.

While publicly listed companies like Swiggy have various options for raising capital, such as bank loans or qualified institutional placements (QIPs), these are not permanent solutions. An analyst from a leading brokerage firm indicated that at Swiggy's current burn rate, the relief provided by the Rapido stake sale would last for only about one year. The analyst stressed that if Instamart fails to achieve profitability by June 2026 as anticipated, Swiggy would likely need to seek further funding within three to four quarters after the Rapido sale to sustain its operations and growth, especially considering the competitive pressure from deeply pocketed rivals.