Quick commerce unicorn Zepto has postponed its initial public offering (IPO) plans by a year and now plans to tap the public markets in calendar year 2026, people aware of the developments told Moneycontrol.
Aadit Palicha, chief executive officer and co-founder, Zepto had earlier said in media reports that the company was confident of going public in 2025.
“That's our ambition...of course, capital markets may change, but for now, we're optimistic that if the business continues to perform as well, we will go public in calendar 2025," Palicha told PTI in an interview towards the end of 2024.
However, Zepto is not going to IPO this year, even if it files its draft red herring prospectus (DRHP) in the coming months, sources said.
“The plan has been pushed out by a few months a few times now. But it is now almost certain that Zepto will not IPO this year as it works on bringing down its cash burn and improving its profit profile,” the source added.
Zepto did not respond to Moneycontrol’s queries.
The development comes amid media reports that suggest the quick commerce firm missed its revenue and cost targets for Q4FY25 and was now recalibrating its strategy.
Moneycontrol had exclusively reported that Zepto was burning $30-35 million (around Rs 250-300 crore) around November, the burn figure then nearly doubled around the January-February period as the firm responded to an intensely competitive market where Eternal’s Blinkit and Swiggy’s Instamart are both present, as per a second source.
Zepto has also been grappling with higher fixed costs. Zepto’s employee salary bills are at around Rs 100 crore each month, around 80-90 percent of rival Swiggy and 60 percent of Eternal (Zomato), despite having half the workforce, Moneycontrol had exclusively reported earlier.
Other operational issues too are taking up Palicha’s time.
Zepto Cafe paused operations in 44 stores in the Delhi NCR belt and surrounding regions. Apart from that, the company is also weathering a notice form Maharashtra FDA which has resulted in a suspension of services in Dharavi and its delivery partners were also striking at some of its Hyderabad centres.
“With those burn numbers, Zepto knows it cannot IPO because public market investors will not have the comfort especially if its rivals are burning much lesser,” the source said.
“Public market investors will want to see profitable growth before investing in the company, especially when they can now benchmark it against listed players like Swiggy and Eternal.”
Internally, another reason why CEO Palicha is not very keen on going public is because he has seen his rival’s share prices take a beating. Indeed, on a year-to-date (YTD) basis, Swiggy’s share price is down around 38 percent to trade at around Rs 333 apiece on the National Stock Exchange (NSE) as on June 4.
At its peak, Swiggy had a market capitalisation of over $18 billion and currently commands a valuation of around $10 billion.
“The better Swiggy and Eternal perform, the better the valuation that Zepto gets – as simple as that. Their valuation falling means even Zepto gets a lower than desired valuation,” one of the persons cited above said.
While Swiggy’s shares have been on a downward trajectory, largely because of mounting losses, the shares of Eternal (formerly Zomato) are up 12 percent on the NSE on a YTD basis. Eternal’s shares have been in favour because the Gurugram-based company has been profitable for eight straight quarters, unlike Zepto and Swiggy.
IPO syndicate complete
Despite Zepto’s IPO timeline moving out by a few months, the company is in the advanced stages of completing its IPO syndicate and picking other bankers.
“JM Financial and Motilal Oswal have been added to the IPO syndicate,” a third source in the know said. These two are the additional names apart from Goldman Sachs, Morgan Stanley and Axis Capital, as reported by Moneycontrol.
JM Financial and Motilal Oswal did not respond to Moneycontrol’s queries.
The company will look to raise around $800 million in its IPO, an increase from an earlier plan of $400-500 million.
Zepto is also finding more comfort in its domestic shareholding pattern, which is another likely reason it is not rushing to IPO. Around 43-44 percent of Zepto is owned by domestic shareholders now and the company is confident it can become a majority Indian-owned firm by the time of its IPO or shortly before it, sources said.
In the interim, Zepto is likely to explore a fairly large private market fundraise from international investors.
Term sheets are in!
Zepto CEO Palicha has spent a lot of time in the US in the past couple of weeks and has held discussions around a potential fundraise from international investors, sources said.
“Zepto could be gearing up to raise as much as $700 million and already has terms sheets from Avenir Growth and General Catalyst,” a third source told Moneycontrol.
Both Avenir and General Catalyst, existing investors in Zepto, have shown willingness to co-lead the round and other existing backers may also up their stake in the company which needs more firepower to fight rivals such as Eternal and Swiggy, the source added.
Avenir Growth and General Catalyst did not respond to Moneycontrol’s queries.
However, nothing is finalised yet and there are chances this round does not materialise if market conditions or if stakeholders decide against such a large fundraise.
While raising more money from international institutional investors may increase foreign ownership in Zepto, the very outcome CEO Palicha has been trying to avoid, it will give Zepto more ammunition to take away more market share from Swiggy, Eternal’s Blinkit, Walmart’s Flipkart, Tata’s BigBasket and more.
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