Hindustan Composites acquisition

Hindustan Composites Ltd Acquires Equity Stake in Swiggy Ltd for ₹5.175 Crore

In a strategic move to diversify its investment portfolio, Hindustan Composites Ltd has announced the acquisition of 1,50,000 equity shares of Swiggy Ltd, one of India’s leading online food ordering and delivery platforms. The acquisition, valued at ₹5.175 crore, is part of Hindustan Composites’ broader strategy to gain long-term and short-term benefits from high-growth sectors.

Acquisition Details

On Monday, September 2, 2024, Hindustan Composites Ltd made a significant announcement regarding its latest investment. The company has entered into a Share Purchase Agreement to acquire 1,50,000 equity shares of Swiggy Ltd, each priced at ₹1, for a total consideration of ₹5.175 crore. This investment secures a 0.01% stake in Swiggy on a fully diluted basis.

The acquisition is expected to be completed by November 30, 2024, marking Hindustan Composites’ entry into the fast-growing online food delivery sector. This move aligns with the company’s strategy to explore new avenues for growth and returns by investing in dynamic and expanding industries.

Swiggy Ltd: A Growing Force in the Market

Incorporated in December 2013, Swiggy Ltd has rapidly expanded its footprint across India, becoming a dominant player in the online food delivery market. Beyond food delivery, Swiggy has diversified its services to include online grocery delivery and same-day package deliveries, catering to the evolving needs of Indian consumers.

For the financial year ending March 31, 2023, Swiggy reported impressive financials, with a turnover of ₹4,653.3 crore and a profit after tax (PAT) of ₹3,757.6 crore. The company’s net worth stands at ₹9,810 crore, reflecting its strong financial health and market position.

Strategic Importance of the Acquisition

Hindustan Composites’ decision to invest in Swiggy is driven by the potential for substantial returns in both the short and long term. The acquisition is seen as a strategic move to diversify the company’s portfolio, gaining exposure to the thriving online food delivery and e-commerce sectors.

This investment is conducted at arm’s length and is not classified as a related party transaction, ensuring transparency and adherence to corporate governance standards.

Market Reaction

Following the announcement, shares of Hindustan Composites Ltd closed at ₹592.00 on the Bombay Stock Exchange (BSE), reflecting a slight decline of ₹1.35, or 0.23%, compared to the previous trading session. The stock’s movement post-announcement suggests a cautious but optimistic outlook from investors regarding the company’s latest investment.

Conclusion:

Hindustan Composites Ltd’s acquisition of a stake in Swiggy Ltd represents a calculated and forward-looking investment. By tapping into the growth potential of Swiggy, Hindustan Composites is positioning itself to benefit from the expanding online food delivery market in India. This move not only diversifies the company’s portfolio but also aligns with its broader strategy to secure profitable investments in high-growth sectors.

FAQs:

1.What is the significance of Hindustan Composites’ investment in Swiggy Ltd?

A. The investment allows Hindustan Composites to diversify its portfolio and gain exposure to the rapidly growing online food delivery market.

2.How much has Hindustan Composites invested in Swiggy Ltd?

A. Hindustan Composites has invested ₹5.175 crore to acquire 1,50,000 equity shares of Swiggy Ltd.

3.What percentage stake does Hindustan Composites hold in Swiggy Ltd after the acquisition?

A. The acquisition represents a 0.01% stake in Swiggy Ltd on a fully diluted basis.

4.When is the acquisition expected to be completed?

A. The acquisition is set to be completed by November 30, 2024.

5.Why is this acquisition important for Hindustan Composites?

A. This acquisition is important as it aligns with Hindustan Composites’ strategy to diversify its investments and capitalize on growth opportunities in high-potential sectors.

6.What are Swiggy Ltd’s key business areas?

A. Swiggy Ltd primarily operates in online food delivery, online grocery, and same-day package deliveries.

7.What were Swiggy Ltd’s financials for the year ending March 31, 2023?

A. Swiggy reported a turnover of ₹4,653.3 crore, a profit after tax of ₹3,757.6 crore, and a net worth of ₹9,810 crore.

8.Is this acquisition a related party transaction?

A. No, the acquisition is not categorized as a related party transaction and is conducted at arm’s length.

9.How did the market react to the announcement of the acquisition?

A. Shares of Hindustan Composites Ltd ended slightly lower by 0.23% on the BSE, indicating a measured response from investors.

10.What are the long-term benefits of this acquisition for Hindustan Composites?

A. The long-term benefits include portfolio diversification and potential gains from the continued growth of the online food delivery and e-commerce sectors.