Inside Zepto’s ₹8,000 Cr IPO: 5 Crucial Insights Investors Should Know

Five years ago, getting groceries delivered in 10 minutes sounded unrealistic. Today, it has become a daily habit for millions of Indians, and Zepto is one of the companies driving that shift. Founded in 2021 by Aadit Palicha and Kaivalya Vohra, Zepto is now preparing for a massive IPO expected to value the company between $6 billion and $10 billion.

The company’s Updated Draft Red Herring Prospectus (UDRHP) shows plans to raise ₹8,010 crore through a fresh issue, along with an Offer for Sale (OFS) by existing investors. Interestingly, the founders are not selling any shares, which signals confidence in the company’s long-term growth.

But beyond the hype, the DRHP reveals a much bigger story: how Zepto is trying to build a profitable quick-commerce business in one of the world’s toughest retail markets.

Here are five key insights investors should understand before this IPO.

1. Zepto’s Growth is Massive, But So Are the Losses

Sales of Zepto jumped from ₹4,454.5 crore in FY24 to ₹22,623 crore in FY26. That is nearly 5x growth in just two years. Its Annual Transacting Users (ATUs), meaning customers who ordered at least once during the year, also surged from 10.57 million to 47.97 million.

Very few consumer internet businesses in India have scaled this quickly. But the other side of the story is equally important.

Zepto’s losses widened sharply from ₹1,214.8 crore in FY24 to ₹5,905.2 crore in FY26. Free cash flow remained deeply negative at ₹4,329 crore, meaning the company is still burning large amounts of cash to sustain expansion.

At first glance, this looks worrying. But quick commerce is currently in a “land-grab” phase, where companies are prioritizing market share over profits. Zepto is aggressively spending on dark stores, customer acquisition, delivery infrastructure, and technology to lock users into its ecosystem before the market matures.

The risk, however, is real. A business losing nearly ₹6,000 crore annually depends heavily on continuous funding. If growth slows or capital becomes expensive, the pressure on profitability could increase significantly.

So, the key question is not whether Zepto is profitable today. It is whether the business is moving toward profitability fast enough. And that brings us to the second insight.

2. Zepto’s Unit Economics Are Improving Fast

Despite the large losses, the underlying operating metrics show meaningful improvement.

Between FY25 and FY26, Zepto’s revenue more than doubled, but losses increased at a much slower pace. This suggests the company is beginning to benefit from operating leverage.

In simple words, as order volumes rise, fixed costs like rent, software systems, and warehouse infrastructure get distributed across more deliveries. That gradually reduces the cost per order.

The biggest driver behind this is Zepto’s “densification strategy”. Instead of spreading stores thinly across cities, Zepto clusters multiple dark stores within high-demand neighborhoods. This reduces delivery distance and allows riders to complete more orders per hour. The impact is already visible in the numbers.

Average delivery distance reduced from 2.05 km in FY24 to 1.83 km by Q4 FY26. That may sound small, but across nearly 1.75 million daily orders, even tiny efficiency improvements create massive savings.

As a result:

• Total cost per order fell from ₹158.55 to ₹127.79
• Adjusted EBITDA loss per order improved from ₹136.15 to ₹78.75

It shows Zepto is not simply burning cash randomly. The business is becoming structurally more efficient as scale increases. This does not guarantee profitability, but it proves the model is improving mathematically as order density rises.

3. Zepto is Quietly Building a High-Margin Advertising Business

Most people think Zepto only earns from grocery deliveries. But one of the most valuable parts of the business today is advertising. Advertisement revenue exploded from just ₹49.2 crore in FY24 to ₹1,635.7 crore in FY26. That is a 33x jump in just two years.

But, why are brands spending so aggressively on Zepto?

Because Zepto reaches consumers at the exact moment they are making purchase decisions.

For example, if someone is already searching for snacks or beverages on the app, brands can place targeted ads directly inside that buying journey. This is far more effective than traditional digital advertising where users may have no buying intent.

According to the UDRHP, brands are generating 5-8x Return on Ad Spend (RoAS) on Zepto. In simple words, every ₹1 spent on ads is reportedly generating ₹5-₹8 in sales. That is why FMCG companies are rapidly shifting ad budgets toward quick-commerce platforms.

Zepto has also built proprietary tools like:

• Zepto Atom for neighborhood-level market insights
• Zepto GPT for AI-driven brand analytics

More importantly, advertising is a high-margin business. Grocery delivery involves inventory, warehousing, and logistics costs. Advertising does not.

This creates an important flywheel:

• More users lead to more orders
• More orders attract more brands
• More ad revenue helps subsidize lower prices
• Lower prices attract even more users

That cycle could become a major long-term advantage if Zepto continues scaling successfully.

4. Zepto is Expanding Beyond Groceries

Zepto is no longer just a grocery-delivery platform.

The number of products available on the platform increased from 12,312 SKUs in FY24 to 49,602 by Q4 FY26.

The company is rapidly expanding into categories like:

• Electronics accessories
• Beauty products
• Home essentials
• Personal care
• Fashion basics

This matters because non-grocery products usually carry better margins than staples like milk, rice, or vegetables. Industry data cited in the UDRHP shows non-grocery categories in quick commerce have already grown from less than 5% of GMV in 2022 to roughly 29% in 2025.

Zepto is essentially trying to increase “wallet share”, meaning it wants consumers to buy more types of products from the same app over time. And the behavior shift is visible. According to the company, new users initially purchase from only 2-3 categories. After two years, that expands to around 18 categories.

This is strategically important because deeper engagement increases customer stickiness. A user who buys groceries, skincare, chargers, and home essentials from Zepto becomes much harder for competitors to steal.

In many ways, Zepto is slowly entering territory traditionally dominated by Amazon and Flipkart, especially for urgent, everyday purchases.

5. The IPO Money is Going Toward Aggressive Expansion

Retail investors should always ask one basic question during an IPO: where will the money go? Zepto’s answer is clear: expansion.

The company plans to use the IPO proceeds for:

• Opening 1,904 new dark stores by FY30
• Funding lease rentals for existing stores
• Investing in technology and cloud infrastructure
• Expanding into Tier-2 and non-metro cities

The technology allocation is particularly notable.

Zepto is spending ₹1,324.8 crore on technology infrastructure, including demand forecasting systems, delivery optimization, and its advertising stack.

This matters because quick commerce is not just a logistics business anymore. Technology increasingly determines delivery efficiency, inventory accuracy, ad monetization, and customer retention.

The Tier-2 city push is another major long-term bet. Cities like Patna, Ranchi, and Guwahati offer:

• Lower rentals
• Lower operating costs
• Less organized retail competition
• Better delivery efficiency due to lighter traffic

Industry estimates suggest non-metro quick commerce could grow far faster than metro markets over the next decade. If Zepto executes well early in these cities, it could create a strong long-term competitive advantage.

Zepto vs Blinkit vs Instamart: Where Does Zepto Stand?

Source: Zepto’s DRHP | Data for FY26

India’s quick-commerce market is now essentially a three-player race between Zepto, Eternal’s Blinkit, and Swiggy’s Instamart.

Among them, Blinkit remains the market leader with:

• The highest market share
• The largest dark-store network
• Positive Adjusted EBITDA in Q4 FY26

That last point is critical because Blinkit has already shown the industry can eventually become profitable at scale. Zepto, however, is currently the fastest-growing scaled player.

Despite operating nearly the same number of dark stores as Instamart, Zepto generated significantly higher revenue and order volumes, suggesting stronger execution and monetization.

The challenge is that Zepto is still in heavy investment mode while Blinkit is entering a more mature profitability phase. That creates both opportunity and risk.

If Zepto successfully scales before cash burn becomes a major issue, it could emerge as a dominant long-term player. But if profitability takes longer than expected, competitive pressure from Blinkit could intensify.

Final Take

Zepto’s IPO is not a traditional investment story. This is not a stable, profitable company with predictable cash flows. It is a high-growth business trying to dominate a rapidly evolving market.

The positives are substantial:

• Revenue growth is extraordinary
• Unit economics are improving
• Advertising is becoming a powerful profit engine
• Customer engagement is deepening
• The founders are not exiting

But the risks are equally large:

• Annual losses remain massive
• Cash burn is high
• Competition is intense
• Profitability still seems years away

For retail investors, this IPO ultimately comes down to one belief:

Do you think quick commerce will become a permanent and dominant part of Indian retail over the next decade?

If the answer is yes, then Zepto has clearly positioned itself as one of the strongest players in that future.

But investors must remember this carefully: Zepto is not a low-risk investment. It is a long-term bet on scale, execution, and the future of consumer behavior in India. And in businesses like this, valuation will matter just as much as growth.