The Zepto IPO explained

**SPEAKER_1** (0:00)
Hello folks, you're tuned in Finshots Daily. In today's episode, we go through Zepto's IPO filing to understand the business and make sense of what the company is really worth.
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Now back to the story.
A few years ago, if someone had told you that one of India's most valuable retail networks would consist of thousands of tiny warehouses hidden inside residential neighbourhoods, most people would have laughed.
Store count, shelf space and food traffic traditionally measured retail success in India. The winners were the companies that could build sprawling supermarkets, secure prime real estate and persuade customers to make the trip. Zepto flipped that model on its head. Instead of operating massive retail outlets, it built a network of dark stores that most consumers never see and promise to deliver pretty much anything you wanted in 10 minutes. Three years later, this bet has turned Zepto into one of India's largest quick commerce companies. Revenue from operations has exploded from 4,454 crore rupees in FI24 to 22,624 crore rupees in FI26. And the company now operates 1,139 dark stores across 66 cities, serves nearly 4.8 crore annual transacting users, and processes more than 23 lakh orders every single day. On the surface, that sounds like the perfect startup success story, except for one small problem. The company lost 5,905 crore rupees in FI26.
And that is precisely what makes the upcoming 8,000 plus crore rupees IPO so interesting. You see, back in the day, IPOs were relatively simple to evaluate. A company generated profits, investors estimated future earnings, and a valuation emerged from that exercise. However, Zepto doesn't fit in that framework. It has already achieved extraordinary scale, but profitability remains somewhere in the future. That forces investors to answer a far more difficult question. How do you value a business that is growing rapidly, but still losing thousands of crores every year? At very first glance, the numbers are certainly unsettling. Revenue more than doubled in FI26, but losses also widened from roughly 4,700 crore rupees in FI25 to 5,905 crore rupees in FI26. Free cash flow and operating cash flow too remained in the red. At the same time, the company continues to spend aggressively on warehousing, delivery infrastructure, marketing, technology and expansion in new cities. Viewed through that lens, the business appears to be trapped in a cycle where growth simply creates larger losses. But the reality is far more nuanced because the economics is improving slightly. As order volumes increase, fixed costs such as rent, inventory and delivery infrastructure get spread across more transactions, making each order more profitable than the last. This is exactly what investors are seeing in Zepto's numbers today. For context, the company's adjusted EBITDA loss, which is operating loss per order, improved from Rs.136 to Rs.79 in a single year. Cost per order declined from Rs.185 to Rs.151 and gross margins expanded from 12.8% to 18.6%.
Even operating cash burn improved despite revenue more than doubling. A major reason for this improvement is something most people don't associate with a grocery delivery company. Advertising. Zepto's advertising revenue, think Wheel of Fortune, scratch cards, coupons, etc.
has exploded by a staggering 33 times from FI24 to more than 1635 crore rupees in FI26. The platform now works with 2,468 brand partners that pay for better visibility, sponsored listings and access to customer insights. This is important because it suggests Zepto's path to profitability may not come solely from delivering groceries more efficiently. It may come from monetizing the attention of millions of customers who already use the platform every month. Of course, none of this would matter if quick commerce were a niche market. But that's a remarkable thing. It isn't.
Quick commerce was the fastest growing major consumer internet category in India between 2024 and 2025 Annual transacting users grew by roughly 131%, far outpacing ride hailing of 6%, food delivery 6% and even broader online retail of 15%.
What's even more surprising is the scale it has already achieved. Around 75 to 85 million Indians used quick commerce platform in 2025 That's already approaching the user base of ride hailing and food delivery apps, despite the industry being far younger. In other words, investors aren't just betting on Zepto. They're betting that quick commerce would become one of India's dominant retail habits over the next decade. And that helps explain why companies continue pouring money into the sector despite the losses. If the market eventually grows to even a fraction of India's 300-plus million online shoppers, today's losses may look very different in hindsight. But if the industry growth story looks compelling, Zepto's financial statements tell a much more complicated story. Despite revenue growing 5-fold in 2 years, Zepto burned over 4,300 crore rupees in free cash flow and carries more than 2,717 crore rupees in lease liabilities tied to its dark store networks. The company may not have bank debt, but its growth still requires significant capital. And that creates a dilemma. However, if they continue to improve their unit economics long enough, Zepto could eventually achieve something that many critics once considered impossible, a profitable quick commerce business. But customers are being asked to believe that outcome before it has actually materialized. That's where the skepticism begins. While unit economics are improving, the industry itself remains brutally competitive. Unlike traditional retail businesses, quick commerce platforms have very few natural barriers to entry. Customers can switch between apps within seconds, merchants can sell across multiple platforms, delivery partners can work for whichever company offers the best incentives, and Zepto isn't operating in a vacuum. Blink.it has the backing of Eternal, Instamart sits within Swiggy's ecosystem, Amazon and Flipkart have entered the category, every major player is chasing the same urban customers, the same neighborhoods, and often the same baskets of groceries. The danger, therefore, is that profitability remains perpetually just over the horizon. A company may improve its economics only to find itself forced to spend aggressively again when a competitor cuts prices, increases incentives, or expands into new markets. This tension becomes particularly evident when we consider how Zepto plans to use the IPO proceeds. Investors generally like IPOs in which fresh capital is used to build new products into new markets or fund growth opportunities. Zepto certainly plans to do some of that. Roughly, Rs.1629 crore has been earmarked for opening nearly 1900 additional dark stores. But another Rs.1735 crore is intended for lease rentals associated with existing dark stores. In other words, part of the IPO proceeds will effectively help fund infrastructure that is already operating today. That isn't necessarily a bad thing, but it does highlight how capital intensive this business model remains. Even at a massive scale, the company still requires significant amounts of external capital to sustain and expand its network. Then there is the issue that tends to attract the most attention during any IPO. Existing shareholders selling shares.