Zepto Eyes ₹1,500 Crore Debt at $5B Valuation
The quick-commerce unicorn eyes a high-interest debt deal led by Edelweiss with an equity-linked upside, signalling confidence in its aggressive growth strategy.
Summary:
Zepto, India’s fastest-growing quick-commerce player, is reportedly in advanced talks to raise ₹1,500 crore in structured debt at a soaring valuation of nearly $5 billion. The proposed deal, led by Edelweiss, includes a minimum interest rate of 16% and an equity-linked upside, potentially enhancing returns to 18%. This reflects rising investor confidence and Zepto’s ambitious expansion drive.
zepto’s Strategic Debt Move Amid Rapid Expansion
Zepto, the rapid grocery delivery service founded by young entrepreneurs Aadit Palicha and Kaivalya Vohra, is once again in the news for its promise of 10-minute delivery. This time, the company is not chasing another equity round but is reportedly in the final stages of securing structured debt financing worth ₹1,500 crore. The move is critical as the startup continues its aggressive expansion across metro cities while eyeing profitability.
Edelweiss is taking the lead in the funding negotiations and has presented a binding offer. The debt, structured with fixed returns and equity-linked components, is designed to offer returns of 16% minimum, climbing up to 18% when equity upside is factored in. This approach gives Zepto the dual advantage of accessing capital without immediate dilution of ownership while still allowing lenders a stake in potential future growth.
A High-Interest, High-Stakes Deal
At the heart of this transaction is the structure of the debt agreement. The arrangement may seem steep, with the reported interest rate at 16%, significantly higher than conventional debt rates in the startup ecosystem. Zepto’s choice is based on a strategic desire to prevent equity dilution in the existing high-valuation landscape.
Sources suggest the total return for lenders may cross 18% due to the inclusion of an equity-linked upside—likely in the form of warrants or convertible instruments. This gives lenders a share in the company’s potential value appreciation, making the deal more lucrative without burdening Zepto with large cash outflows upfront.
The deal also signals the growing maturity of India’s startup debt market, where high-growth ventures increasingly seek alternative funding instruments beyond equity.
Valuation Nears $5 Billion: A Vote of Confidence.
The structured debt raise is taking place at an impressive valuation of nearly $5 billion, significantly up from Zepto’s last valuation of $3.6 billion during its previous funding round in 2023. This notable increase in valuation highlights the optimistic outlook regarding Zepto’s business model and its ability to execute effectively.
The jump in valuation is primarily attributed to Zepto’s successful expansion into multiple cities, improved unit economics, and the establishment of efficient dark store networks that have reduced delivery times and costs. Moreover, the company’s ability to maintain order density and repeat purchase behaviour has reassured investors about its path to profitability.
Why Debt Instead of Equity?
Raising structured debt instead of traditional equity funding is a calculated move. For one, it allows Zepto to access funds while retaining its existing cap table. Secondly, it signals that the company is confident about its revenue and cash flow trajectory in the short to medium term, sufficient to service interest payments on such debt.
By taking on structured debt at this stage, Zepto may soon open the door for a larger equity round at a higher valuation—possibly from global sovereign funds or late-stage investors seeking stakes in profitable Indian startups ahead of IPOs.
Market Context and Competitive Landscape
Zepto’s move comes when the quick-commerce sector is witnessing heightened competition and funding challenges. Competitors such as Blinkit (owned by Zomato), Swiggy Instamart, and BigBasket’s BB Now are all vying for market share in the instant delivery sector, frequently working with very narrow profit margins.
However, Zepto has carved out a niche by maintaining consistent delivery timelines and a tech-driven backend that efficiently manages inventory and delivery logistics. Its robust operations have allowed it to outpace rivals in key metros like Mumbai, Delhi, and Bengaluru. It has positioned it as a leader in India’s nascent but growing quick-commerce market.
What’s Next for Zepto?
With the structured debt raise likely to be closed soon, the proceeds are expected to be deployed toward:
Enhancing its dark store network.
Improving supply chain and cold storage facilities.
Enhancing technological skills to improve last-mile delivery efficiency.
If done successfully, the debt raise could provide Zepto with a substantial financial reserve without giving up equity at its current valuation. This would help the company move closer to profitability while gearing up for a possible IPO in the next few years.
Conclusion: A Bold Bet on Future Growth
Zepto’s decision to opt for high-interest structured debt reflects confidence and urgency. As it accelerates its growth in a fiercely competitive market, the deal structure allows it to balance immediate capital needs with long-term strategic goals. With strong investor optimism and efficient scaling of operations, Zepto could be positioning itself to become India’s first quick-commerce IPO success story.
The image added is for representation purposes only
