Majority of Zepto's dark stores operationally profitable now: Co-founder

Founded by Kaivalya Vohra (L) and Aadit Palicha (R) in 2020, Zepto has raised $360 million from Y Combinator, Alteria Capital and several others

A majority of Zepto's dark stores are now profitable at an operating level, according to the company's co-founder and CEO, Aadit Palicha, in an interview with Moneycontrol. Zepto operates over 200 dark stores in major metro cities in India, and approximately 50-60 percent of them have started generating cash flows, Palicha added.

This development comes at a time when the quick-commerce industry has exhibited signs of slowing down in an inflationary environment. The most recent financial results from Blinkit, a company owned by Zomato, revealed a downward trend in the average order value (AOV) over the past two quarters. In Q4FY23, the AOV stood at Rs 522, down from Rs 568 in Q2FY23.

Palicha, however, stated that Zepto's AOVs have experienced year-on-year growth of approximately 40 percent, hovering in the range of Rs 440-450.

“Over the past few months, most consumer-led companies have gone through a lot of pain, their growth has slowed but Zepto has been an anomaly on that front. Over the past 12 months, our business has grown 4X in size and most of our dark stores have turned profitable faster than traditional offline supermarkets turn profitable in India,” Palicha said.

In its first year of operations, FY22, Zepto reported a revenue of Rs 142.4 crore while its losses totaled Rs 390.4 crore. But the company had ended FY23 with a topline of Rs 1,200 crore in FY23, with a “significantly” better bottom line, according to Palicha who did not reveal specific numbers.

“After FY23’s performance, we’re sure that in about 12 months’ time from now, we’ll be at an annualized revenue rate of Rs 10,000 crore, which translates to about Rs 800 crore in monthly revenue,” he added.

That however seems like an uphill task for the nearly three-year-old company given Zomato, now a close rival of Zepto, ended FY23 with a revenue of Rs 7,709 crore after being in business for about 15 years.

The Y Combinator-backed company competes closely with Swiggy Instamart, Zomato’s Blinkit, Tata’s Big Basket, and Reliance-funded Dunzo in a largely populated market.

“People have been deeply underestimating Zepto’s scale and how much improvement we’ve made to our unit economics,” Palicha, who claims the company will turn EBITDA-positive by May 2024, said.

About 2-3 quarters after achieving that milestone in a year's time, Zepto hopes to go public.

Senior executives appointed 

To prepare for its expansion, the Mumbai-headquartered company has promoted senior executives internally as some exit the company.

Amritansu Nanda, who joined Zepto on the first day and led growth, will be moving on to take a break, Palicha said. Viral Jhaveri will now be Zepto's chief growth officer after being the company's chief business officer for nearly two years. He joined Zepto after stints with Uber Eats and other firms.

Similarly, Vinay Dhanani, currently the chief operating officer, will be elevated to president - of the supply chain and category. Dhanani has previously worked with Flipkart and ITC.

Dhanani's earlier position as COO will be filled by Vikas Sharma, who joined the quick-commerce company as the lead of central and city operations.

Zepto's top-level changes come at a time when rivals like Zomato and Swiggy have also made similar moves.

Earlier this month, Moneycontrol reported that Ashish Lingamneni, vice president (VP), head of brand and product marketing at Swiggy and Nishad Kenkre, VP, head of revenue and growth, Instamart, were both leaving the Bengaluru-based foodtech giant.

In their place, Swiggy roped in Aparna Giridhar to replace Lingamneni, while it promoted Sreeram Suresh to take over Kenkre’s position.

Similarly, Zomato made strengthened its top deck after a slew of senior executives left the Gurugram-based company. It appointed Rishi Arora as the CEO of Hyperpure, its B2B business to deliver groceries to restaurants. Arora, a long-time Blinkit executive, had previously been elevated as the co-founder of Blinkit in July last year.