Zepto taps domestic mutual funds for $300 million share sale ahead of IPO

Quick commerce unicorn Zepto, which is actively preparing for its initial public offering (IPO), has engaged with several top mutual fund houses in the country over the past weeks to facilitate share sales worth $300 million (around Rs 2,600 crore) ahead of a public market debut later this year, sources in the know told Moneycontrol.

“Zepto CEO Aadit Palicha has met with executives of top mutual funds including SBI Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund and others to warm them up to the idea of a pre-IPO round to the tune of $300 million later this year,” one of the persons cited above told Moneycontrol.

During the course of his meetings, CEO Palicha has told mutual fund houses that Zepto will breakeven on an earnings before interest, taxes, depreciation and amortisation (EBITDA) basis by Q4FY26, the person added.

Zepto did not reply to Moneycontrol’s queries.

$300 million fully in secondaries

A clear path to profitability helps instill more investor confidence especially when shares worth $300 million change hands. Zepto’s current pre-IPO round of $300 million will be entirely in secondary share sales and there will be no primary capital involved.

“Every foreign shareholder of Zepto will dilute their stake in the company and angel investors, like Oleg Wladimir Nicolas Tscheltzoff, Jacob Yedidya Honig, Jonathan Saint and several others will fully offload their shares to make way for more domestic investors,” a second person in the know told Moneycontrol.

Zepto’s decision, to provide an exit to foreign investors and bring in more Indian shareholders, is the latest in its attempt to increase its domestic shareholding and become a company majorly owned by Indian investors.

In November 2024, Zepto secured $350 million from Motilal Oswal, Ranjan Pai’s Claypond Capital and other Indian investors as it brought in more domestic shareholders and reduced reliance on foreign capital ahead. The move to bring in more domestic shareholders, and provide liquidity to foreign investors, will however be a gradual one.

The $300 million round is expected to materialise only by October 2025. “Zepto is expected to file its draft IPO papers within the next two months and will only facilitate secondary share sales around October 2025 when the company is closer to its IPO,” the first person cited above said.

To be sure, companies refrain from sharing key financial metrics with potential investors during the time of filing their draft red herring prospectus (DRHP) because of the rules and regulations that the Securities and Exchange Board of India (SEBI) has in place.

Zepto, which recently flipped its base back to India from Singapore, has been on a fundraising spree. The company has already raised $1.35 billion in a span of five months. The Bengaluru-based company raised $665 million in June 2024 from Glade Brook Capital, The StepStone Group, Nexus Venture Partners and others and then went on to close a $340 million round in August 2024 from General Catalyst and others.

It then secured $350 million from Motilal Oswal, Ranjan Pai’s Claypond Capital and other Indian investors.

“Zepto has a cash balance of a little over $1 billion currently and intends to keep it at that level, especially in the current competitive landscape,” a source said.

The move to have enough cash balance and maintain a strong balance sheet is understandable since Zepto competes with larger rivals such as Zomato’s Blinkit, Flipkart Minutes, Swiggy Instamart, Tata BigBasket and others in a red-hot market which has seen multiple players pour in millions of dollars to gain market share.

The quick commerce industry, which is just about four years old, is already seeing consumption worth over $6 billion and is projected to grow to a $25-30 billion opportunity over the coming years, analysts have underscored.

As the space involves, companies are expanding operations and trying to be one up against rivals. Which player emerges as the winner remains to be seen.