Swiggy's path to profitability in quick commerce may not depend solely on opening more dark stores, offering steeper discounts or driving higher order volumes, but on its ability to shake away its Foreign-Owned and Controlled (FOCC) status under FEMA rules and move to an inventory-led model.
Earlier this week, the company crossed an important milestone after foreign shareholding fell to 49.76%, taking Indian ownership above the 50% threshold required to begin qualifying as an Indian Owned and Controlled Company (IOCC).
But achieving Indian ownership might have been the easier part of the process. Achieving Indian control could involve a long path to amend its foundational documents. It may require rewriting constitutional governance flows, renegotiating long-standing investor rights and securing broad shareholder consensus.
For companies backed by multiple global institutional investors, achieving that supermajority can prove as challenging as satisfying the ownership thresholds under India's FDI regime.
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If Swiggy ultimately secures IOCC status, Instamart could legally transition from a marketplace to an inventory-led model, allowing it to own the products it sells, procure directly from manufacturers, improve procurement margins and gain greater control over pricing and supply chains. The strategy has already been tested by rival Blinkit, whose transition to an inventory-led model reshaped its revenue profile and coincided with improving profitability.
Swiggy's pursuit of IOCC status is not news. In April, the company proposed amendments to its Articles of Association to remove legacy board nomination rights and align its governance framework with the requirements for Indian ownership and control. In the explanatory statement to shareholders, Swiggy explicitly said the amendments were intended to facilitate its transition to an Indian Owned and Controlled Company.
However, the proposal failed at the extraordinary general meeting in May after securing 72.36% of votes, short of the 75% supermajority required for a special resolution under Section 14 of the Companies Act, 2013 to alter a company's Articles of Association.
Why IOCC matters
India's foreign direct investment regime permits foreign-invested e-commerce companies to operate only as marketplaces. The exception is for companies that qualify as Indian Owned and Controlled Companies under the Consolidated FDI Policy and the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
Under Press Note 2, FDI is permitted only in marketplace-based e-commerce, and prohibited in inventory-based models.
Under the marketplace model, platforms largely earn commissions from third-party sellers. Under an inventory-led model, the platform purchases goods directly from brands, stores them in its own warehouses or dark stores and sells them to customers as the retailer. Revenue is recognised on the gross value of products sold rather than only the commission earned.
More importantly, the company gains the ability to negotiate directly with FMCG manufacturers, improve procurement costs, optimise inventory, launch private labels and exercise greater control over pricing and promotions.
Those advantages materially improve gross margins over time, although they also require higher working capital because the company owns inventory.
Blinkit's blueprint
After becoming an Indian Owned and Controlled Company, Blinkit shifted the majority of its business to an inventory-led model. Management has indicated that around 80% of Net Order Value had already migrated to owned inventory, with the transition expected to increase further. It has also described the shift as margin accretive.
Blinkit's reported revenue increased from 1,156 crore in Q2 FY25 to 9,891 crore in Q2 FY26, reflecting the move from recognising commission income to recognising gross merchandise sales. While the increase was partly an accounting consequence of the inventory model, it also reflected rapid growth in the underlying business.
This also showed up in the company's bottom line. Blinkit's adjusted EBITDA improved from a loss of 178 crore in Q4 FY25 to a profit of 37 crore in Q4 FY26. Management has attributed the improvement to a combination of inventory ownership, better procurement, operating leverage, higher order density and scale.
While not directly attributable solely to moving to an inventory-led model, Blinkit's profitability turn coinciding with its move away from marketplace-based e-commerce cannot be ignored.
Swiggy's own fillings highlight the move towards the more flexible model. Its food delivery business has steadily improved margins and cash generation, while Instamart remains in investment mode. The company's FY25 annual report and IPO documents identify quick commerce as its largest long-term growth opportunity but also acknowledge the substantial costs associated with rapid dark store expansion, customer acquisition and fulfillment infrastructure.
Moving to an inventory-led model could address several of those challenges simultaneously. Direct procurement from brands can reduce sourcing costs, better inventory planning can minimise stock-outs and improve fulfilment efficiency, private labels can increase gross margins, while greater pricing flexibility can improve competitiveness without relying solely on third-party sellers.
The hurdles of becoming an IOCC
Swiggy has now taken its first concrete step towards that objective. But ownership alone does not determine IOCC status. Under the FDI policy, a company must be both Indian-owned and Indian-controlled.
The control test examines who has the power to appoint the majority of directors and who exercises control over management or policy decisions. Regulators look beyond the shareholding pattern to board nomination rights, shareholders' agreements, veto rights, affirmative voting rights and other contractual arrangements that determine who effectively runs the company. In simple terms, ownership does not automatically mean control.
Swiggy's attempt earlier this year to amend its Articles of Association highlights this proposition. The proposed amendments sought to remove legacy board nomination rights held by investors such as Accel and SoftBank as part of a broader governance restructuring. However, the special resolution failed to secure the 75% shareholder approval required for amendments to the Articles.
Although the company clarified that the amendments would not have concentrated control in the hands of the founders, the episode demonstrated that governance rights remain central to Swiggy's IOCC ambitions.
The more consequential document, however, is the confidential shareholders' agreement. If foreign investors continue to retain extensive veto rights or contractual control over key management and policy decisions, regulators could conclude that the company remains foreign-controlled despite majority Indian ownership.
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The next phase
Swiggy's latest ownership milestone therefore marks the beginning rather than the completion of its regulatory transition.
The harder task is securing the governance changes necessary to satisfy India's control test and complete its transition to an Indian Owned and Controlled Company.
If it succeeds, Instamart would gain the legal flexibility to operate an inventory-led model that has already reshaped Blinkit's economics. If it does not, Swiggy's fastest-growing business will continue to operate within the constraints of the marketplace framework even as competition increasingly shifts towards procurement efficiency and margins rather than delivery speed alone.
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