Quick commerce upstart can't afford to go slow

Unilever

Today 04:49

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Ujjaini  Dutta
BENGALURU, June 16 (Reuters Breakingviews) - India's Zepto has disrupted the distribution edge held by fast-moving consumer goods companies including Unilever ULVR.L and Nestle NESN.S, and amped up competition for the country's food delivery duopoly. Yet the startup's rush to debut in Mumbai as soon as July at a time when local equity markets are battered reveals its financial desperation: losses are deepening and venture capital funding is increasingly hard to come by. Accepting a valuation markdown will be the price of its admission into public markets.
The 5-year-old company founded by Aadit Palicha and Kaivalya Vohra aims to raise just shy of $1 billion to fund its mission of speedily delivering daily essentials and groceries to customers' doorsteps. There's plenty of demand for its services that boast a 12-minute median delivery time: Zepto's revenue grew 103% from the previous year to 226 billion rupees ($2.39 billion) in the 12 months to the end of March 2026.
Yet losses are mounting as it shovels money into expanding its dark store network and acquiring customers. Zepto's net loss widened 26% to 59 billion rupees for the full financial year. It lacks a profitable core business to cushion its bottom line, unlike food delivery companies $7 billion Prosus-backed PRX.AS Swiggy SWIG.NS and rival Zomato. Nor does it have a rich parent like Tata group, owner of grocer BigBasket, which is also vying to provide instant gratification to affluent Indians.
The biggest problem is Zepto's emptying war chest. Take the company's total cash balance of 56.80 billion rupees ($600 million) at end of March, strip out lease liabilities of 27.1 billion rupees and net cash shrinks to 29.7 billion rupees, implying enough to sustain just three quarters of operating activities or as little as five months using a more conservative calculation of its liquidity.
The market won't support a rich valuation, warns Satish Meena, founder of e-commerce consultancy Datum Intelligence, especially with two stronger listed rivals. Swiggy, whose stock languishes 34% below its 2024 IPO price, trades at 2.5 times this year's estimated sales, per LSEG. On that multiple Zepto would be worth $5.9 billion, less than the $7 billion valuation it achieved in its October funding round and well short of the up to $10 billion touted in local media. About half the workforce leaves Zepto every year; executives can only hope any new investors it attracts stick around for longer.
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CONTEXT NEWS
India's Zepto is selling new shares worth up to 80.1 billion rupees ($837 million) in its initial public offering, the quick commerce company's prospectus published on June 8 showed. Existing investors including ​Nexus Ventures and Contrary ZEP Holdings will sell up to 113.5 million shares in the offering.
Zepto plans to use proceeds from the IPO to expand its network of dark stores, invest in technology and cloud infrastructure as well as ​to fund acquisitions. The firm was valued at $7 billion in October, when it raised $450 million. 
Zepto is targeting a July listing, the Economic Times reported on June 9, citing people aware of the matter.

(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on DUTTA/ujjaini.dutta@thomsonreuters.com))