Online grocer Zepto in talks for $250 million secondary sale ahead of IPO

Zepto won’t raise any additional capital in the process, but employees and some existing investors will be able to sell their shares for cash

Online grocer Zepto is in talks for current stockholders to sell as much as $250 million of their equity, a move aimed at boosting the ownership of Indian investors before the startup seeks to go public later this year.

The private equity arms of Motilal Oswal Financial Services Ltd. and Edelweiss Financial Services Ltd. are in discussions with the Bangalore-based startup to buy shares in the secondary sale, according to people familiar with the matter, who asked for anonymity to speak about confidential matters.

Zepto won’t raise any additional capital in the process, but employees and some existing investors will be able to sell their shares for cash. The company expects to execute the transactions at a valuation of just over $5 billion, the same level as its most recent funding round late last year, the people said.

The move is part of Zepto’s plan to increase shareholding by Indian investors ahead of an initial public offering of shares later this year or early 2026, the people said. Indian shareholders currently account for about 33% of Zepto’s cap table, with founders Aadit Palicha and Kaivalya Vohra owning about a fifth of the firm. The goal is to lift that overall proportion to about 50%, one of the people said.

Zepto and Motilal Oswal did not respond to requests for comment, while Edelweiss declined to comment.

Historically, secondary stock sales have been controversial because they allow managers and other employees to cash in before an IPO or sale, potentially making them less motivated in building the business. More recently however, such sales have become a way to reward staff — with the goal of boosting morale — and allowing investors to take money off the table.

Zepto competes in India’s hyper-competitive, low-margin grocery delivery space. Rivals in the market include e-commerce giant Amazon.com Inc.’s India unit and homegrown competitors such as SoftBank Group Corp.-backed Swiggy Ltd., publicly traded Zomato Ltd., and conglomerate Tata Group’s BigBasket.

Palicha and Vohra, 22, childhood friends, dropped out of Stanford University’s computer science program and returned to India to build the startup in 2021, when they were teenagers.