Zepto Expected to Face Sharply Lower Valuation for IPO
Fast-delivery firm Zepto Ltd. is aiming for a valuation in its initial public offering significantly below its $7 billion high as worries over cash burn dampen enthusiasm for the sector and spark doubts about the company's route to profitability.
Certain domestic institutional investors are estimating the company's value to be between $3 billion and $3.5 billion, they mentioned. That contrasts with the $7 billion valuation it obtained during a fundraising event last October.
India’s rapid delivery companies, spearheaded by Eternal Ltd.’s Blinkit, have attracted a significant urban clientele and secured billions from several of the globe’s biggest investors. However, the enthusiasm has diminished as investors are paying more attention to profits. This change in perception is visible in the shares of Swiggy Ltd., a competitor of Zepto, which have decreased by approximately 29 percent from their listing price in late 2024.
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Zepto is looking to secure up to $850 million via the IPO and is still in talks with potential investors, the sources indicated. The ultimate valuation, size of the issue, and timeline for launch may still be altered.
Zepto shares are trading around 39 rupees each in the unlisted market, giving the company a valuation of approximately Rs.49,200 crore ($5.1 billion), as reported by UnlistedZone.com, a platform that enables the buying and selling of private company shares. The stock has decreased roughly 33 percent compared to its March value.
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The IPO includes a new issuance of shares totaling Rs.8,010 crore ($831 million) and a sale of 113 million shares by current investors, as stated in the company's draft prospectus.
Funds from the primary offering will be allocated to enhance the dark-store network, bolster technological infrastructure, and support growth initiatives.
Zepto, supported by investors such as Nexus Venture Partners, Glade Brook Capital Partners, and StepStone Group, competes against Amazon.com Inc.’s operations in India and local competitors like Swiggy, Blinkit, and Tata Group's BigBasket. Axis Capital Ltd., Motilal Oswal Investment Advisors Ltd., and the Indian branches of Morgan Stanley, HSBC Holdings Plc, and Goldman Sachs Group Inc. are overseeing the IPO.
Additionally, Zepto is getting ready to introduce 'Select', a specialized premium grocery service in its app, aiming to penetrate India's rapidly expanding premium consumption sector. The service is anticipated to launch in the upcoming weeks and will provide imported food, gourmet groceries, and other high-end products via a dedicated section in the Zepto app. It will rival products like Blinkit Gourmet and FirstClub, which is based in Bengaluru and was the first to establish the premium grocery segment.
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The launch signifies a change for Zepto, which has primarily developed its business focusing on regular, high-frequency buying. It aligns with the company's strategy to concentrate on India's leading 40–60 cities rather than quickly entering smaller markets.
The report indicates that Zepto has commenced interactions with high-end consumer brands to incorporate products prior to the launch. The firm has also recently conducted a pilot in specific areas that garnered positive customer feedback.
The report noted that Zepto intends to competitively price various imported and premium products to differentiate itself from competitors' offerings.
The launch showcases rising demand for high-end products in India, as consumers are progressively spending more on sectors like gourmet food, lifestyle items, and fashion. The trend has also garnered investor attention among various high-end consumer brands. Zepto aligns itself with competitors like Blinkit Gourmet and FirstClub in the high-end grocery sector, aiming to enhance its market presence with the imminent launch of Select while broadening its premium product range for consumers.