In the midst of the increasingly fierce competition in the quick commerce arena, Zepto is reportedly in early-stage discussions to secure a minimum of $300 million from global investors, according to sources cited by ET.
The Mumbai-based startup could potentially achieve a valuation of at least $2.5-3 billion based on current market metrics, sources familiar with the conversations suggest. This marks a significant increase from its previous valuation of $1.4 billion when it attained unicorn status last year.
As per insights gathered from recent investor presentations, Zepto is striving to attain EBITDA positivity by September. It’s reported that the company presently boasts an annualized gross sales run-rate of $1.2 billion.
Although still in its initial phases, the upcoming fundraising initiatives are poised to fortify the company’s financial position while simultaneously establishing a substantial reserve for confronting market leader Zomato-owned Blinkit and Swiggy Instamart. Additionally, Walmart-owned Flipkart is gearing up to venture into quick commerce within the next two months.
Continue Exploring: Quick commerce unicorn Zepto raises $31.25 million in Series E funding, supported by Goodwater Capital and Nexus Venture Partners
“We are negotiating with international investors, such as sovereign wealth funds”. A person with knowledge of the matter has stated that a board meeting later this month will address the new fundraising plan and its parameters.
Zepto, having achieved a $1 billion gross sale run rate last month, is actively scaling its operations and has ambitious ecommerce strategies in place. Despite receiving a term sheet from at least one growth stage fund recently, the company has decided not to proceed with it.
“Zepto wants to move up the timeline to reach the positive Ebitda mark by a few months. That will improve its situation going into the next round. A group of investors who have forward-looking plans on key metrics have been given access to the company’s financials, according to a source.
“They (Zepto) have ambitious plans for a total rise and are undoubtedly considering a new round. According to someone with knowledge of the dynamics, the company appears to have increased its market share in some of the nation’s most competitive cities, accounting for the majority of the growth in rapid commerce.
Based on financial records, Zepto operates about 340 dark stores, more than 200 of which have positive Ebitda. While Swiggy Instamart has more than 500 dark stores in comparable places, Blinkit has more than 450 dark stores spread over 25 cities.
Aadit Palicha, co-founder and CEO of Zepto, stated that the company is currently not engaged in active fundraising efforts, and there are no ongoing discussions with investors.
“Strong execution, not capital raising, is the objective at the moment because we are about to be Ebitda positive after closing a sizable round a few months ago,” he continued.
Our mature stores currently make up 6-7% of Ebitda, with the potential to reach 13-14%. We are increasing at a rate of 140% annually. Palicha commented on company expansion, “so these stores are able to generate their own cash.”
He mentioned that Zepto has expanded its business by more than 100% since its previous fundraising round in October, with Ebitda showing a 600 basis points improvement.
Last month, Zomato CEO Deepinder Goyal remarked that Blinkit has the potential to surpass food delivery and emerge as a larger business. This highlights the long-term prospects of Blinkit. As a market leader in major metropolitan areas, Blinkit is broadening its range of stock keeping units (SKUs) to include fashion, jewellery, toys, beauty products, and electronics. Similarly, Zepto is also expanding its offerings within these categories.
Continue Exploring: Quick commerce platforms Blinkit and Zepto expand into e-commerce, targeting fashion, beauty, electronics, and more
Over the past year, Zomato has invested approximately $240 million in Blinkit. Blinkit has achieved a gross merchandise value (GMV) of more than $1 billion in the first nine months of fiscal year 2024. Zomato holds nearly $1.5 billion in cash reserves.
A senior ecommerce executive who is keeping tabs on the growth of quick commerce platforms stated, “These players will need financial resources to scale up the infrastructure for an ecommerce play which is linked to the funding talks.”
Swiggy has directed its capital investment towards Instamart, as its food delivery business has reached a point of stability in terms of investment requirements. The company earmarked a $700 million investment for Instamart.
Swiggy has been focused on bolstering its financial position in anticipation of a potential IPO later this year. According to a Reuters report, the company recorded a loss of $200 million for the first nine months of 2023, with revenue totaling $1.02 billion. Blinkit is projected to achieve break-even in the first quarter of fiscal year 2025, as per earlier guidance provided by Zomato.
Continue Exploring: Blinkit to outgrow Zomato within a year, says CEO Deepinder Goyal
