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Swiggy's quick-commerce arm Instamart is set to shift from its existing marketplace model to an inventory-led model after shareholders approved changes to the company's foreign ownership cap. The move will allow Swiggy to qualify as an Indian-owned and controlled company, enabling it to hold inventory under India's foreign investment rules. The change is expected to improve Instamart's contribution margin by about 80 basis points through bulk buying, better supply-chain control and lower wastage. However, the inventory model will also increase working capital requirements as Swiggy will need to fund and manage stock.
Swiggy's quick-commerce business Instamart is preparing to move to an inventory-led model as the company looks to improve margins and compete more closely with market leader Blinkit.
Shareholder approval for Swiggy's foreign ownership cap will allow the company to qualify as an Indian-owned and controlled company, a status required under India's foreign investment rules for holding inventory. Instamart has operated under a marketplace model since its launch in August 2020, earning commissions on products sold through the platform.
The shift could improve Instamart's contribution margin by about 80 basis points, according to Swiggy. Analysts said the inventory model could provide benefits through bulk purchasing, better control over pricing and assortment, improved supply-chain management and lower wastage.
Anand Rathi analyst Shobit Singhal said bulk buying would provide a cost advantage, while greater access to sales data could help Swiggy work more closely with brand partners and reduce wastage.
Instamart's contribution margin stood at negative 0.2% in the first quarter, compared with negative 1.8% in the previous quarter. Equirus Securities analyst Samarth Patel estimated that an 80-basis-point improvement would translate into around INR 4-5 per order. He said this would represent roughly one-sixth of the INR 30 per order that Instamart needs to reach break-even.
Blinkit, operated by Eternal, made a similar shift to an inventory-led model last year. Its overall margins have improved for five consecutive quarters and turned positive in the March 2026 quarter. Eternal has attributed the improvement to inventory ownership, supply-chain efficiencies and expansion into higher-margin categories such as electronics, home decor and gourmet food.
Swiggy, which listed in 2024, remains unprofitable but has set a target of achieving positive earnings per share by fiscal 2031.
The inventory-led model will also bring higher working capital requirements. Brokerage Jefferies said Swiggy would need additional funds to purchase and manage inventory. Eternal had previously indicated that Blinkit's working capital requirements were largely linked to inventory ownership.
Swiggy and Eternal have been expanding their quick-commerce businesses beyond groceries and into categories that can generate higher margins. They compete with Amazon India, Walmart-owned Flipkart and Reliance, while smaller rival Zepto is seeking to raise up to USD 837 million through a proposed public listing this year.
According to consumer sector consultant Akshay D'Souza, marketplace models limit the ability of quick-commerce companies to control inventory, pricing and profitability, particularly for products sold through the inventory-led route.
For Swiggy, however, the change in business model alone is unlikely to determine profitability. D'Souza said the company would also need to increase sales of higher-margin premium products and develop its private-label portfolio.
Source Reuters
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