Quick commerce platform Zepto is preparing for its initial public offering (IPO) in July, offering investors a chance to engage with one of India's fast-expanding consumer internet businesses. The company confidentially filed draft papers in December and received regulatory observations in May.
Analyst Flags Profitability Concerns
Despite its growth potential, Zepto faces substantial execution risks, particularly concerning profitability, according to a report by Anand Rathi Share and Stock Brokers. The brokerage highlights intense competition within the quick commerce sector as a key challenge.
Zepto has established itself as India's second-largest quick commerce player by implementing an 'Every Day Low Prices' strategy. This approach prioritizes high order frequency over larger basket sizes, often featuring removed platform fees and free delivery for orders above ₹99. While this strategy has boosted daily order volumes, it also means Zepto's average order value is significantly lower than its competitors.
Higher Throughput Needed for Breakeven
Anand Rathi's analysis indicates that Zepto requires a much higher order throughput per store to achieve profitability. For instance, while rivals like Blinkit and Swiggy Instamart might reach adjusted EBITDA breakeven with 1,500-1,800 orders per store daily, Zepto needs closer to 3,000 daily orders per store. This disparity underscores the difficulty of maintaining margins while pursuing aggressive growth.
Rapid Expansion and Financials
Between FY24 and FY26, Zepto significantly expanded its dark store network to over 1,100 locations. During this period, annual order volumes grew at a compound annual growth rate (CAGR) of nearly 120 percent, with revenue from operations also increasing rapidly, supported by strong advertising income.
In Q4 FY26, Zepto handled approximately 2.8 million daily orders, trailing Blinkit's 3.1 million but ahead of Swiggy Instamart's 1.2 million. The company's business model involves delivering groceries and essentials within 10-15 minutes using an inventory-led approach. Revenue streams include product margins, convenience fees, advertising, promotions, and subscriptions.
Despite Growth, Losses Persist
Despite reducing its adjusted EBITDA loss per order through improved operating efficiency and lower marketing spend, Zepto continues to report considerable overall operating losses. The low-price strategy, while boosting user engagement, makes the platform structurally reliant on high order frequency. Acquiring new customers could become harder as major players like Blinkit, Swiggy Instamart, Amazon, Flipkart Minutes, and JioMart intensify their expansion efforts.
IPO Details and Investor Outlook
Zepto plans to raise an estimated $1 billion (₹9,500 crore) from its IPO, which includes a fresh share sale of ₹8,010 crore and an offer-for-sale (OFS) of existing equity shares. Proceeds from the IPO are earmarked for expanding its dark store network (with nearly 1,900 additional stores planned), funding lease rentals, and strengthening its technology and cloud infrastructure.
The company is backed by notable investors, including cricket legend Sachin Tendulkar, actor Abhishek Bachchan, and prominent Dalal Street veterans such as Ramdeo Aggrawal, Motilal Oswal, and Madhusudan Kela.
Anand Rathi suggests that investors seeking exposure to India's quick commerce market might find Blinkit's parent company, Eternal, a relatively safer option due to its larger scale, positive adjusted EBITDA, and broader ecosystem. For Zepto, the IPO offers a chance to invest in hyper-growth, but investors will need to closely monitor its cash burn, competitive pressures, sustained execution, and clear path to profitability post-listing.