Zepto valued at USD 3.6 bn in latest fund raise; eyes IPO

New Delhi: Grocery delivery startup Zepto on Friday said it has raised USD 665 million in an investment round that valued the firm at USD 3.6 billion, almost triple of what it was worth a year back, and is preparing to list soon.

The fund raise will help Zepto compete with e-commerce giant Amazon, Zomato-owned Blinkit, and homegrown firms such as Swiggy's Instamart and Tata Group's BigBasket in the hyper-competitive grocery delivery space that is marred by high investments and low margins.

The three-year-old startup raised USD 665 million from new investors, including New York-based private equity firm Avenir Growth Capital, venture firm Lightspeed, and Avra Capital, a new fund started by former Y Combinator Continuity head Anu Hariharan and Andreessen Horowitz. Existing investors including Glade Brook, Nexus, and StepStone Group also participated, the Mumbai-based firm said in a statement.

Aadit Palicha, 21, who co-founded Zepto with childhood friend Kaivalya Vohra in 2021 after dropping out of Stanford's computer science programme and returning to India, said the company's gross merchandise value, or the value of total transactions through the platform, has "multiplied year-on-year to a base of USD 1 billion", and over 75 per cent of its 341 dark stores are profitable at a core operating level.

Zepto is "pretty close" to becoming operating cash flow positive and would look to go public and a listing in Mumbai in near future.

The startup plans to double warehouses that are used to deliver groceries within 10 minutes in a radius of two kilometers to more than 700 by March 2025 by reinvesting sales from mature stores to fund the expansion.

Zepto has about 29 per cent market share in 10-minute grocery delivery service (known as quick e-commerce), up from 15 per cent in March 2022. Blinkit is the market leader with nearly 40 per cent and the rest is with Instamart.

The latest fundraise comes less than a year after the Mumbai-based startup raised USD 235 million at a valuation of USD 1.4 billion.

"We've gone from 0 to 1 billion-plus in sales, or GMV, in 29 months, that is faster than any other internet company before us... Even on a base of over a billion dollars at this point, we are growing 100 per cent-plus year on year. And that for us is one of the big drivers of this fundraise," Palicha, who is also the CEO of the company, told PTI.

Attributing the growth to the performance of the quick commerce firm, the young entrepreneur said, "This is largely because of the input excellence we've built across the supply chain.

"Whether it is sourcing excellence, mother hub efficiency, line haul utilisation, or our last mile, the innovation that we've done, or forecasting, we're in this place where even as we've been able to grow, we've been able to drive efficiency to get the business to pretty much close to full operating cash flow positive today." He said the overall business is close to operating at break-even cash flow.

Nearly 75 per cent of the company's stores are fully EBITDA positive as of May 2024, he said.

"Over the next 12-18 months, although it might fluctuate, but we'll still be pretty close to operating cash flow positive, and the idea is to keep in that direction, get the business to a place where we can list in the next 9-12 months," he said.

Zepto co-founder and CTO Kaivalya Vohra said the firm plans to hire top talent across engineering, product, growth, finance, operations, and category management.

"If you are looking for a high growth, high meritocracy and high intensity culture where you can convert hard work and ambition into disproportionate career growth, Zepto is the place for you," he said.

Company's stores previously took 23 months to achieve profitability; today, they only take six months, the firm said.

"This dynamic of stores turning profitable faster and faster has enabled Zepto to grow rapidly while simultaneously achieving near EBITDA positivity at a company level.

"We plan to continue operating with fiscal discipline as we scale from 350 stores to 700 stores by reinvesting the capital generated from mature stores back into the business," Palicha said, adding, "If we are able to achieve this while continuing to delight customers, I believe we will be ready to go public relatively soon." Paul Hudson, CIO of Glade Brook Capital Partners, said, "Zepto is redefining e-commerce in India, with uniquely strong product-market fit and world-class execution and innovation. The Zepto team embodies what is possible for the next generation of Indian founders, and Glade Brook could not be more excited to continue our partnership." Hariharan said Zepto may appear to be a mere 10-minute quick commerce company at first glance, "but they are transforming Indian e-commerce by creating the 'Hyperlocal Amazon', combining affordable prices with local convenience".