Synopsis

Zepto Ltd. seeks a lower IPO valuation, reflecting industry cash burn concerns. Foreign investors indicate interest at $4.5 billion, while domestic ones value it lower. This contrasts sharply with its $7 billion valuation from last October's fundraise. The company aims to raise $850 million through its initial public offering. Proceeds will fund network expansion and technological infrastructure improvements.

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Indian fast-delivery company Zepto Ltd. is seeking a valuation in an initial public offering sharply below its $7 billion peak as concerns over cash burn temper optimism around the industry and raise questions about the firm’s path to profitability.

Foreign investors have indicated interest at a pre-money valuation of about $4.5 billion, people familiar with the matter said, declining to be named as the discussions are private. Some domestic institutional investors are valuing the company between $3 billion and $3.5 billion, they added. That compares with the $7 billion valuation it secured during a fundraise last October.

India’s instant delivery firms, led by Eternal Ltd.’s Blinkit, have won a large urban customer base and drew billions of dollars from some of the world’s largest investors. But the exuberance has faded as investors increasingly focus on profits. That shift in sentiment is reflected in Zepto rival Swiggy Ltd.’s shares, which have fallen about 29% from their late 2024 listing price.

Zepto is aiming to raise as much as $850 million through the IPO and continues to hold discussions with prospective investors, the people said. The final valuation, issue size and launch timeline could still change.

Shares of Zepto are changing hands at about 39 rupees each in the unlisted market, valuing the company at about 492 billion rupees ($5.1 billion), according to UnlistedZone.com, a platform that facilitates transactions in private company shares. The stock is down about 33% from its March level.

Zepto did not respond to a request for comment.

The IPO comprises a fresh issue of shares worth 80.1 billion rupees ($831 million) and an offer for sale of 113 million shares by existing investors, according to the firm’s draft prospectus. Proceeds from the primary issue will be used to expand dark-store network, strengthen tech infrastructure and fund growth initiatives.

Zepto, backed by investors including Nexus Venture Partners, Glade Brook Capital Partners and StepStone Group, competes with Amazon.com Inc.’s India business as well as local rivals Swiggy, Blinkit and Tata Group BigBasket.

The IPO is being managed by Axis Capital Ltd., Motilal Oswal Investment Advisors Ltd. and the Indian units of Morgan Stanley, HSBC Holdings Plc and Goldman Sachs Group Inc.

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