Quick-commerce startup Zepto has temporarily put its plans for an initial public offering (IPO) on hold and is instead preparing to raise more than Rs 1,000 crore through a pre-IPO funding round, according to a Moneycontrol report citing people familiar with the matter. The company is expected to raise the capital from some of its existing investors as it looks to strengthen its financial position before returning to the public markets.
The proposed funding round is expected to see participation from existing backers, including Glade Brook, General Catalyst, Goodwater Capital and Nexus Venture Partners. The company is reportedly targeting a valuation of around $4 billion to $4.2 billion as part of the pre-IPO transaction.
Zepto’s decision comes after the company reportedly found the valuation terms being proposed by domestic mutual funds for its planned IPO to be unfavourable. The quick-commerce firm had earlier been preparing for a sizeable public issue, but its plans have undergone significant changes amid concerns over valuation, cash burn and the sustainability of its rapid expansion.
The company had initially considered raising around Rs 8,000 crore through its IPO. However, the proposed issue size was later reduced to approximately Rs 5,000-6,000 crore. The change reflects the more cautious approach being taken as Zepto prepares to transition from a privately funded startup to a publicly listed company.
“Zepto pauses IPO plans for now, likely to raise over Rs 1,000 crore in pre-IPO funding from existing investors…”~Chandra R. Srikanth
Domestic Mutual Funds Raise Concerns Over Cash Burn:
The reported pause in Zepto’s IPO plans comes against the backdrop of concerns raised by prospective domestic institutional investors. According to the report, major mutual fund houses, including SBI Mutual Fund, ICICI Prudential, Kotak, HDFC and others, had raised questions about Zepto’s cash burn and the sustainability of its current pace of expansion.
Zepto was reportedly burning more than Rs 900 crore every quarter, while its cash reserves were estimated to provide only around three quarters of runway. The financial position became a key concern for incoming investors, particularly as the company continues to operate in the highly competitive quick-commerce sector, where companies spend heavily on dark stores, delivery infrastructure, technology and customer acquisition.
The valuation expectations also appear to have become a major point of discussion. While Zepto was reportedly looking to raise funds at a valuation of around $5 billion, domestic mutual funds were said to be valuing the company in the range of $2.5 billion to $3 billion post-money. This represents a substantial gap between the valuation sought by the company and the price that potential public-market investors were reportedly willing to consider.
The development is also notable because Zepto had been valued at around $7 billion in its latest private-market fundraising round, which took place just over six months ago. The difference between its previous private valuation and the valuation being discussed for its potential IPO highlights the challenges faced by high-growth startups when they move towards public markets.
“Zepto may defer IPO amid pricing standoff…”~Samidha Sharma
Pre-IPO Round Could Give Zepto More Time:
Under rules set by the Securities and Exchange Board of India (SEBI), an IPO-bound company can raise up to 20 percent of its proposed fresh issue through a pre-IPO placement. However, the amount raised through such a placement has to be deducted from the fresh issue component of the eventual IPO.
For Zepto, the proposed pre-IPO fundraising could provide additional capital while giving the company more time to improve its financial performance before launching a public offering. The involvement of existing investors could also help the startup avoid raising funds at the lower valuations reportedly being proposed by some potential IPO investors.
The company is now expected to focus on improving its profitability profile and reducing its cash burn. According to the report, Zepto’s quarterly cash burn has fallen to around Rs 700 crore from more than Rs 900 crore previously. The reduction could extend the company’s cash runway by approximately two additional quarters, giving it greater flexibility as it evaluates its next move.
“Zepto may defer its IPO plans as negotiations over its valuation hit a roadblock…”~Pranav Mukul
Zepto Still Hopes to Return to Public Markets:
Despite putting its IPO plans on hold for now, Zepto reportedly remains hopeful of returning to the public markets in the coming months. The company is expected to use the additional time to improve its profitability profile and potentially secure a better valuation when it eventually launches its IPO.
The latest development underlines the growing pressure on India’s quick-commerce startups to demonstrate a clear path towards sustainable growth. While Zepto has rapidly expanded its operations and established itself as one of the country’s leading quick-commerce players, the IPO process has brought greater scrutiny to its spending, cash requirements and valuation expectations.
For Zepto, the pre-IPO round could therefore serve as a bridge between its high-growth startup phase and a future public listing. By raising more than Rs 1,000 crore from existing investors, the company could gain additional financial breathing room while working to reduce its cash burn and strengthen its financial profile.
The eventual IPO timeline, however, remains uncertain. The company will need to demonstrate stronger financial performance and convince public-market investors that its business model can deliver sustainable growth before it returns with a revised public offering. For now, Zepto appears to be prioritising additional private funding and operational improvements over an immediate stock-market debut.
