Zepto delays IPO by two quarters as investors push for lower valuation

Quick-commerce firm plans to raise about Rs 1,000 crore in a pre-IPO round as investors seek greater clarity on profitability, cash reserves and growth prospects

Zepto's plan to make history as the world's first pure-play quick-commerce (qcom) company to go public has hit a hurdle. But Aadit Palicha, co-founder of the company, told employees in a town hall on Friday that this is just a pause for one to two quarters.

 

The delay comes as investors have become increasingly cautious over the company's valuation amid concerns around profitability, limited cash reserves and intensifying competition in the quick-commerce market, two people aware of the matter told Business Standard.

 

These headwinds have led Zepto to defer its initial public offering (IPO) by nearly two quarters. The company now plans to raise about ₹1,000 crore through a pre-IPO funding round that is expected to see participation from existing investors, including Motilal Oswal Financial Services, General Catalyst, Goodwater Capital, Glade Brook and Nexus Venture Partners.

 

In the town hall, Palicha told employees the company continued to believe in its growth story and intended to list only after demonstrating stronger operating metrics in its public filings rather than accepting a valuation it was uncomfortable with. He also urged employees to ignore external criticism and remain focused on execution, according to sources.

 

Internally, the company believes the delay is primarily driven by a lack of investor conviction rather than any deterioration in its business. According to people familiar with the discussions, Zepto felt investors were assigning an unfavourable valuation because they were unable to reconcile the company's pace of growth with the financial information available in its draft red herring prospectus (DRHP).

 

The concerns have been amplified by comparisons with listed peers Swiggy and Eternal (formerly Zomato), with investors seeking greater clarity on Zepto's customer acquisition strategy, user loyalty and its ability to build a sustainable business before backing the issue, sources said.

 

According to people familiar with the matter, investors are valuing the five-year-old company at around $2.5 billion-$3 billion, significantly below the $7 billion valuation at which Zepto last raised capital in October 2025.

 

Even at the lower valuation, some mutual funds backing the company are unwilling to invest, sources said.

 

The company now plans to revise its DRHP to reflect improved financial performance, the impact of negative working capital on its balance sheet and the benefits of the festive season before proceeding with the IPO, said a person familiar with the development. If the current filing cannot be updated, Zepto is evaluating whether to refile later this year or wait until after the festive season.

 

People familiar with the discussions said many investors have benchmarked Zepto against listed peers Swiggy, applying similar assumptions to the quick-commerce business. Zepto, however, maintains that it has already improved average daily orders as well as average order value (AOV).

 

People privy to the matter, however, said raising ₹1,000 crore alone would not address the company's underlying challenges. They added that with Zepto's current IPO papers valid until August 21, the company is likely to file fresh listing documents at a later date.

 

Asked why investors are reportedly seeking a lower valuation despite the success of the quick-commerce model and whether competition from Amazon and Flipkart was a factor, a top investor, who declined to be named, said: "It is more about demand and supply. Zepto is raising a pre-IPO round because it needs capital, and investors know that. They are in a position to negotiate the valuation on their terms. It has nothing to do with the rapid pace at which Flipkart and Amazon are expanding their quick-commerce operations."

 

Another source with direct knowledge of Zepto's plans said: "The IPO is likely to be put on pause. Zepto plans to raise about ₹1,000 crore in a pre-IPO funding round, primarily from domestic investors. The move is aimed at further strengthening its domestic shareholder base."

 

Another industry executive familiar with the matter said: "The market has well-funded incumbents as well as new entrants. There are already six major players in quick commerce. Eternal, the parent of Blinkit, has about $1.9 billion in cash, while Swiggy has around $1.5 billion. For Amazon and Flipkart, funding is not a constraint. Investors know the market is unlikely to sustain all six players over the long term, and only a few are likely to emerge as winners. At the same time, cash burn remains high, and investor appetite for that is limited despite strong growth in volumes."

 

Srinath Sridharan, policy researcher and corporate adviser, said domestic institutional investors, particularly mutual funds, have become key market makers in India's IPO landscape.

 

"They are far more pragmatic about valuations because they are ultimately stewards of retail investors' capital. The current geopolitical environment has further strengthened this discipline, with investors favouring businesses that demonstrate resilience and a credible path to profitability over narratives built on growth alone. The consequence is that lofty private-market valuations and business models with uncertain long-term economics are now facing a far more demanding public-market reality," he said.

 

Satish Meena, founder of Datum Intelligence, said the environment today is markedly different from when Swiggy and Zomato went public.

 

"When Zomato did its IPO, its quick-commerce vertical did not exist. In Swiggy's case, the company already had a profitable food delivery business that could generate cash. After listing, both companies also raised additional capital through qualified institutional placements to fund their quick-commerce expansion," he said.

 

Meena added that competition has become significantly more intense. While Amazon Now and Flipkart Minutes have deep pockets, Eternal and Swiggy have cash reserves of ₹18,288 crore and ₹14,367 crore, respectively. Zepto, in comparison, has cash reserves of around ₹2,800 crore, giving investors another reason to scrutinise its long-term funding position.