As the fast-growing quick commerce startup Zepto gears up for its much-anticipated initial public offering (IPO), a strategic financial maneuver is underway to ensure compliance with Indian regulatory frameworks. In a high-stakes bid to consolidate local ownership, Zepto’s founders are reportedly in the final stages of securing over ₹1,500 crore (~$175 million) in structured debt financing, led by Edelweiss Alternative Asset Advisors.
In this article, we’ll explore Zepto’s strategic promoter financing deal, its implications for IPO readiness, regulatory compliance, and how it aims to boost Indian ownership in a globalized cap table.
Credits: Outlook Business
A Move to Reshape Ownership Before IPO
The primary goal of the financing arrangement is to enable founders Aadit Palicha and Kaivalya Vohra to purchase shares from international investors and raise their combined promoter stake from 18% to approximately 20%. Once the deal concludes, Indian shareholding in Zepto is expected to reach around 30%, strengthening the company’s positioning under foreign direct investment (FDI) regulations.
This is a proactive attempt to qualify Zepto as an Indian Owned and Controlled Company (IOCC) — a status crucial for compliance with India’s restrictions on inventory-led e-commerce models, especially as the company scales and prepares for life as a listed entity.
Deal Structure: High-Yield, High Stakes
The structured debt deal has several key features:
- Total Size: ₹1,500 crore
- Anchor Investor: Edelweiss will contribute half of the amount and serve as the lead underwriter.
- Interest Rate: Minimum of 16%, with an equity-linked upside that could push the return to around 18%.
- Tenure: 3 years, with the deal expected to close by July.
Additional Participants: Local family offices and small credit funds are contributing the remaining ₹750 crore, reportedly on similar terms.
A binding term sheet has already been issued by Edelweiss, and the structure resembles what one industry insider described as “classic promoter financing” — a relatively rare move in India’s startup ecosystem, particularly among cash-burning tech firms.
Regulatory Strategy: Playing by the (FDI) Rules
India’s FDI policy distinguishes sharply between marketplace models (which allow 100% foreign investment) and inventory-led models, which are only permitted for companies that are Indian owned and controlled. Zepto, which relies on maintaining its own inventory in hyperlocal dark stores to promise deliveries in 10 minutes, needs to meet the IOCC requirement.
To be classified as IOCC, more than 50% of a company’s ownership and control must lie with Indian residents. By increasing domestic ownership, the founders aim to avoid regulatory friction and pave a smoother road to IPO.
This mirrors a recent move by Zomato, whose board approved a cap on foreign shareholding in its subsidiary Blinkit to give it “greater operational flexibility” in managing inventory under similar regulations.
Why This Matters: Laying the Groundwork for a Successful IPO
This financial restructuring serves a dual purpose: boosting founder control and ensuring regulatory eligibility for its upcoming IPO, expected in the second half of 2025. By consolidating Indian ownership now, Zepto is setting the stage for a listing that not only passes regulatory muster but also appeals to Indian institutional investors and retail participants.
Given that Zepto was last valued at over $5 billion, the current financing deal is structured at the same valuation, reinforcing investor confidence and maintaining continuity with prior funding rounds.
Credits: Entrepreneur
Final Thoughts: A Bold, Calculated Bet
In India’s rapidly evolving quick commerce space, regulatory navigation is as critical as operational excellence. Zepto’s decision to secure high-yield promoter financing demonstrates a strong belief in its own growth story, a willingness to absorb near-term financial pressure for long-term governance stability, and a desire to remain firmly rooted as an Indian company.
With IPO plans looming, the move signals maturity — a startup that’s not just moving fast, but moving smart.
