Zepto in talks for USD 300 mn raise at USD 2.5-3 bn valuation – ET Auto


Zepto in talks for USD 300 mn raise at USD 2.5-3 bn valuation – ET Auto

Zomato has invested around USD 240 million in Blinkit over the past one year. Blinkit has clocked a GMV of more than USD 1 billion for the first nine months of FY24.

Amid the intensifying quick commerce battle for supremacy and expansion into ecommerce territory, Zepto is in early stage talks to raise at least USD 300 million from global investors, two sources briefed on the matter said.

The Mumbai-based upstart, based on current market multiples, would look at a valuation of around USD 2.5-3 billion at least, compared to its last valuation of USD 1.4 billion when it turned unicorn last year, people aware of the conversations said.

Zepto, according to people who have reviewed its recent investor presentations, is aiming to become Ebitda positive by September. They said the company currently has an annualised gross sale run-rate of USD 1.2 billion.

The new fundraise plans, though in the early stages, will boost the company’s balance sheet as well as help create a war chest for the company to take on market leader Zomato-owned Blinkit as well as Swiggy Instamart. Walmart-owned Flipkart is also readying to enter quick commerce in two months’ time.

“There are talks with global investors, including sovereign wealth funds. The new fundraise plan and contours will be discussed in a board meeting later this month,” a person aware of the matter said.

Zepto, which hit a USD 1 billion gross sale run rate last month, is aggressively expanding operations and has broader ecommerce plans, as reported by ET. At least one growth stage fund recently issued a term sheet as well, but the company is not taking it forward.

“Zepto is aiming to advance the target to hit the Ebitda positive mark by a couple of months. That will put it in a better position for the new round. The company has shared its financials with a group of investors with forward looking plans on key metrics,” a source said.

“They (Zepto) are definitely exploring a new round and have big plans in terms of total raise. The company seems to have gained more share in some of the top cities in the country, driving the majority of growth in quick commerce,” another person aware of the dynamics said.

Zepto has about 340 dark stores and over 200 of them are Ebitda positive, according to a person who has reviewed the financials. Blinkit has over 450 dark stores across 25 cities while the same for Swiggy Instamart would be over 500.

Aadit Palicha, cofounder and CEO of Zepto said the company is not actively fundraising, and there are no ongoing conversations with investors. “We closed a large round just a few months ago and we are on the verge of hitting Ebitda positive, so strong execution is the priority right now, not raising capital,” he added.

“We are growing 140% year-on-year, and our mature stores are now doing 6-7% of Ebitda and this can go up to 13-14%. So, these stores can generate their own cash,” Palicha said on business growth.

According to him, Zepto grew its business by over 100% since its last fundraise in October and Ebitda improved by 600 basis points.

Battle ahead

Zomato CEO Deepinder Goyal said last month that Blinkit can become a bigger business than food delivery, underscoring the long-term potential of the business. Blinkit, a market leader in top metros, is expanding its stock keeping units (SKUs) across fashion, jewellery, toys, beauty and electronics. Zepto too is expanding in offerings in the same categories.

Zomato has invested around USD 240 million in Blinkit over the past one year. Blinkit has clocked a GMV of more than USD 1 billion for the first nine months of FY24. Zomato has nearly USD 1.5 billion cash on its books.

“These players will need capital to scale up the infrastructure for an ecommerce play which is linked to the funding talks,” a senior ecommerce executive tracking the expansion of quick commerce platforms said.

For Swiggy, Instamart has been the avenue it has been investing capital in as its food delivery business has largely stabilised in terms of investments. The company had allocated a USD 700 million investment for Instamart.

Swiggy has been trying to strengthen its financials ahead of a potential IPO later this year. The company, according to a Reuters report, clocked a loss of USD 200 million for the first nine months of 2023 on a revenue of USD 1.02 billion. Blinkit is expected to break-even during the first quarter of the new fiscal year of 2025, according to previous guidance given by Zomato.

  • Published On Apr 2, 2024 at 10:51 AM IST

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