Why Swiggy Failed The Shareholder Litmus Test

In October last year, Swiggy CEO Sriharsha Majety called Instamart’s shift to an inventory-led model an eventuality. 

That conviction, it seems, has hit a hurdle. 

Shareholders rejected the special resolution that sought to amend Swiggy’s Articles of Association (AoA) and become an Indian-Owned and Controlled Company (IOCC). The proposal secured around 72% votes in favor, falling short of the 75% threshold needed to pass the special resolution. 

At a cursory glance, this could be seen as a routine setback. But in reality, this is the first time Swiggy’s has faced such a challenge. 

The amendment was not the only item on the agenda. One could argue that the inclusion of a revised board structure along with the AoA amendment as a combined resolution was actually the breaking point for shareholders.  

The lack of a majority vote reflects the rising investor unease around Swiggy’s governance structure, its continued losses, and aggressive investments in Instamart growth even as profitability remains a distant dream. 

As indicated above, the rejected proposal, if passed, would have also altered board nomination rights within Swiggy. The resolution proposed allowing group CEO Majety to nominate himself and another senior management executive to the board. Cofounder and chief growth officer Phanei Kishan Addepalli would have received the right to nominate himself as director under specific conditions. 

While Swiggy said that the amendments were closely tied to the company’s plan to get that all-important IOCC status before the shift to inventory model, some shareholders saw these proposed board moves and rights as a red flag.  

Proxy advisory firm Institutional Investor Advisory Services (IiAS) and others opposed the resolution arguing that Swiggy failed to provide adequate clarity on the time and structure of IOCC transition. It also questioned whether board nomination rights should be linked to relatively low shareholding thresholds and vested employee stock options that were yet to be exercised. 

These pointers might have influenced the investors including Legal & General Investment Management (LGIM), The California Public Employees’ Retirement System (CalPERS), and British Columbia Investment Management Corp. (BCI) among others to also turn down the resolution. 

So shareholders are still waiting for the eventuality that Majety spoke about after Q2. And this failed resolution has put Instamart’s future in the quick commerce race under the spotlight. 

Why Inventory Model Matters More Than Ever

Quick commerce is evolving. What initially felt like a convenience-led delivery business connecting brands to consumers through dark stores is increasingly becoming an infrastructure and supply chain game as platforms such as Blinkit, Instamart, Zepto search for economies of scale. 

While most of them know that supply chain optimisation is a continuous process, they also realise that the biggest lever for margins is owning the goods being sold. This allows greater control for margins in the output or marketplace and less leakages on the input side.  

Eternal-owned Blinkit’s biggest gains in profitability have come after the shift to inventory model. Instamart knows this is its eventual destination, and a majority of shareholders would comfortably agree, if they look at this comparison of how Blinkit has fared since the switch against Instamart in the same timeline. 

After the switch’s Blinkit’s investment focus is on procuring more inventory and setting up dark stores and turning the various efficiency knobs at its disposal. This has inevitably intensified pressure on rivals. Zepto, which is expected to file for an IPO soon, will be equally scrutinised on these metrics.  

There’s little doubt though that Instamart is the growth engine for Swiggy, clocking 48.7% YoY jump in adjusted revenue to ₹1,090 Cr in Q4. 

While the switch will entail a period of adjustment for the revenue recognition, in the long run it will bring in more control over pricing and sourcing, thus improving margins and potentially customer experience. It also allows Swiggy to truly scale up its private label play which has gained ground in the top markets. 

Shareholders would agree that the inventory model shift has to happen and this is what Majety was addressing after the end of Q2. But today they have other questions on their mind.   

Board Appointment Red Flags

The move to inventory model has its own compliance and regulatory complexities. It would also involve up-front spending by Instamart to procure inventory and then it needs to have a solid distribution plan in place to truly maximise the efficiencies.  

Under India’s FDI norms, foreign-owned ecommerce marketplaces such as Swiggy and even Eternal need to restructure operational control before they can start owning the inventory they are selling. This means qualifying to be an Indian owned and controlled company despite having foreign investors on the cap table.

This is the part that has drawn sharp criticism from IiAS, in particular, which recommended shareholders vote against the resolution. In its report dated May 16, the proxy advisory firm objected to the addition of fresh nomination rights tied to the founders and senior executives.

It argued that share ownership must meaningfully determine board nomination rights and said vested stock options should not become the basis for board representation. As per the proposal, cofounder Phani Kishan Addepalli’s nomination rights were linked to a combination of vested ESOPs and equity shares equivalent to just 0.11% of the share capital. 

The group also pointed out the original postal ballot notice did not clearly mention the IOCC rationale, something that was only highlighted later after investor concerns emerged. 

This view was seconded by InGovern, another proxy advisory body, despite it recommending shareholders vote in favour of the resolution.

Shriram Subramaniam, founder of InGovern said, “Swiggy failed to communicate clearly to its shareholders regarding the IOCC motive. They should be forthcoming.”  

He added, ”Typically shareholders when they see another shareholder owning barely 2-3% in the company getting special rights to nominate the board of directors, they are typically worried.” 

The proposal would have allowed CEO Majety to nominate one senior management member to the board as long as he continued holding 67.7 Mn equity shares (2.45% stake), or remained in senior management. 

As per a Mint report, Legal & General Investment Management (LGIM), a UK-based fund manager and Swiggy shareholder, noted that the proposed amendments would enable Sriharsha Majety and Phani Kishan Addepalli to exercise control and influence over the board which would be disproportionate to their respective shareholdings. LGIM further added that board nomination rights are not entirely contingent upon the maintenance of a minimum shareholding threshold. 

As per the national daily, British Columbia Investment Management Corp, CalPERS, Canada Pension Plan Investment Board, City of New York Group Trust, were the other large investors who opposed the resolution. 

In response to Inc42 queries, Swiggy said, “Swiggy acknowledges the outcome of the resolution, which received 72.35% shareholder approval, falling short of the required threshold by 2.65%. The proposed amendment reflects our long-term commitment to ensuring management representation on the Board and advancing our transition toward becoming an Indian Owned and Controlled Company (IOCC) under applicable Indian foreign exchange laws and regulations. These remain enduring priorities for us. We will continue to engage constructively with our shareholders and work towards a positive outcome.”

Another Caution: Rising Losses 

The governance debate is taking place at a time when Swiggy’s financial performance continues to remain under scrutiny. Will the pivot to inventory model be enough to fix this? 

Swiggy’s loss widened 33% to ₹4,154 Cr in FY26 from ₹3,117 Cr in the previous year. The biggest part of the losses stems from Instamart, where Swiggy is spending aggressively on expansion, dark stores and customer acquisition. 

Growth aside, shareholders and public market investors want to see operating discipline, governance standards and execution on the path to profitability. 

Swiggy’s stock performance reflects some anxiety on whether the company is ticking these boxes. Shares have tanked more 35% since listing as of this month. 

But the failed resolution cannot be seen as a larger message from shareholders. The reality is that while Blinkit has improved its bottomline considerably since moving to an inventory model, it was in a similar position as Swiggy before the switch. 

Investors back Swiggy’s quick commerce growth story. The challenge is weak confidence in the governance standards on future board appointments, especially given that this was a big control-oriented move by the management so early in the company’s listed lifetime.

One could argue that if the management had trimmed the losses further, it may have earned the investor faith in getting this proposal passed. 

There’s little doubt that Swiggy will revisit the amendments to its business model, with a modified structure and more forthright disclosures around board transitions. And there’s also little doubt that eventually the profits will come in as and when Swiggy figures out the levers. 

Whether this particular failed resolution will have an overhang or influence on major shareholders coming in later or those voting on future issues floated by Swiggy’s management remains to be seen. This is after all a moment without too many precedents in the Indian new-age tech stock ecosystem. 

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Edited By Nikhil Subramanima
Creatives: Varshita Srivastava

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