Does Zepto Deserve a $10 Bn Valuation? Decoding the Numbers and Narrative

Zepto is approaching public markets with negative earnings, negative free cash flow and roughly 10 months of runway. Yet it is reportedly seeking a valuation of up to $10 billion, betting investors will pay for a future in which scale, advertising and operating leverage eventually turn quick commerce into a profitable business.

“At a valuation of $7-10 billion, Zepto would trade at approximately 2.7x-3.8x FY26 operating revenue of ₹22,624 crore,” said Sourav Choudhary, MD, Raghunath Capital.

At the upper end of its $10 billion valuation, Zepto's revenue multiple of around 4x is higher than Swiggy's current multiple of about 2.9x, but remains below Eternal's 4.3x multiple (the only player with its Qcomm arm Blinkit approaching breakeven).

It goes without saying that for both Eternal and Swiggy, quick commerce is only one part of a much broader business portfolio, making Zepto the only pure-play quick commerce company among the three. Among newly listed consumer internet companies, Meesho trades at a revenue multiple of around 6x, broadly in line with Nykaa's 6.4x–6.7x. FirstCry, meanwhile, trades at about 1.3x sales, reflecting how public markets continue to assign premium valuations to internet businesses that offer stronger growth visibility and a clearer path to profitability.

But Zepto's IPO comes at a very different time compared to these players. While more mature startups like PhonePe, Flipkart have opted to defer their public listings, Zepto is looking to hit Dalal Street against the odds. Companies postponing their IPO plans are citing unconducive market conditions, including heightened volatility triggered by the West Asia conflict. This has resulted in capital being relatively pulled out of Indian equities through DII outflows, while on the domestic front, SIP inflows have also been slowing on a month-on-month basis.

The company's pre-IPO (grey market) valuation, at around $5 billion, has already seen a decline of nearly 25% from its previous valuation of about $7.5 billion. However, grey market valuations cannot be relied upon entirely. And in Zepto's case, without traditional valuation benchmarks, it remains difficult to pin down a definitive valuation.

What is certain, however, is the company's current state. The six-year-old startup has negative earnings and is asking investors to value a future optimistic version of the business, one where higher order volumes and rising AOV drive operating leverage, helping the company achieve breakeven, while its increasingly lucrative advertising business and scale eventually translate into sustainable profits.

With several factors at play, the listing will ultimately test the market's appetite for Zepto's IPO.

The Desperate Need For The IPO

The latest draft papers show that Zepto's unit economics are moving in the right direction. Its adjusted EBITDA loss per order improved from ₹136 to ₹79 in a year, while cost per order fell from ₹185 to ₹151. At the same time, gross margins expanded to 18.6% from 12.8%. But cash continues to flow out of the business, leaving the company with a roughly 10-month window before it runs out of money to fund operations.

Based on its Q4 FY26 numbers, Zepto's free cash burn stands at ₹882 crore per quarter. Meanwhile, Zepto reported a closing cash balance of ₹5,681 crore at the end of FY26. After discounting for investments tied to its ₹2,710 crore lease liabilities, the company is left with net liquidity of around ₹2,970 crore. At a quarterly cash burn of ₹882 crore, this translates into a runway of about 3.5 quarters, or roughly 10 months.

This is against Blinkit and Instamart's parent companies' net cash reserves of around ₹13,380 crore and ₹12,600 crore, respectively, at the end of FY26, according to BofA.

This limited runway makes Zepto even more desperate for an IPO, especially considering that the company has already raised $1.2 billion across 12-15 funding rounds and may have little room left for further stake dilution.

Besides this, new entrants to the quick commerce race, such as Amazon and Flipkart, are sitting on deep investment pools and are well-positioned to burn cash through discounts and incentives to attract India's price-sensitive consumers. Hence, Zepto also needs capital to battle this.

Against this backdrop, the company is seeking a public offering that will include a fresh issue of shares worth ₹8,010 crore, alongside a window for investors such as Nexus Venture Partners to offload up to 11.35 crore shares through an OFS.

The company, with 47.97 million ATUs by FY26, has also witnessed a sharp rise in customer acquisition costs, suggesting that acquiring incremental users is becoming significantly more expensive even as the business claims to have entered a more mature phase.

While the prospectus does not explicitly state that user acquisition efficiency has deteriorated, the trend becomes evident when Zepto's active transacting user (ATU) growth is viewed alongside its advertising expense disclosures.

Despite increasing advertising spend by 17% to ₹1,389 crore in FY26 from FY25, Zepto added only 9.6 million net ATUs, compared to 27.8 million additions in FY25. As a result, the company's advertising cost per net user added surged 3.4X to around ₹1,447 in FY26 from around ₹427 in FY25.

It is pertinent to note that the company views customer acquisition costs as an investment in building a user base that can generate returns over the customer's lifetime, particularly by serving as a lever for its advertising business. Besides, the data analytics and consumer insights offered to D2C brands on the platform could emerge as a separate and potentially lucrative revenue stream. Product testing units are one such example.

While companies get up to 12-18 months after receiving SEBI approval to go public, the factors discussed above may have accelerated Zepto's IPO plans. The bigger question is whether these growth and valuation levers are strong enough to justify its asking price and win over public market investors.

Betting On Scale And Ads

For all the attention on dark stores and 10-minute deliveries, one of Zepto's most important businesses may be the advertising space it sells to brands. The more users the platform attracts, the more valuable its digital shelf space becomes for brands looking to influence purchase decisions. As a result, advertising revenue jumped 33X to ₹1,636 crore in FY26 from ₹49 crore in FY24. While it accounted for just 7.2% of revenue, it has the potential to emerge as the company's most potent margin drivers as it requires little incremental spending on riders, warehouses or logistics and has a margin of almost 100%.

This is why platforms such as Amazon, Nykaa, Blinkit, Meesho and Myntra have also increasingly relied on advertising and seller-funded promotions to improve profitability. This reflects the true profit model of modern commerce platforms which is low-margin commerce with high-margin advertising leading to a viable business.

At the same time, Zepto is riding the wave of the quick commerce boom. A Bain study estimates that the market could reach ~$35 Bn by 2030, roughly 3–4X its FY26 size. Quick commerce is already the fastest-growing major consumer internet category in India, with annual transacting users growing around 131% between 2024 and 2025, far outpacing ride hailing (6%), food delivery (6%) and broader online retail (15%).

With 75-85 million Indians using quick commerce platforms in 2025, investors will not just be betting on Zepto, but on the overall quick commerce TAM and the fact that Zepto offers the only pure-play quick commerce exposure on Indian exchanges.

Zepto's 5-fold revenue growth in two years and over 2X revenue jump in the last year also underlines how the company could become part of one of India's dominant retail habits in future.

However, the Aadit Palicha-led company is also sitting on a mounting loss of ₹5,905 crore in FY26. To move closer to breakeven on a per-order basis, Zepto is banking on scale-led operating leverage driven by both higher order volumes and higher average order values (AOVs).

While Zepto trails both Blinkit and Swiggy Instamart in terms of order value, its order volumes have already surpassed Instamart's. However, it remains significantly behind Blinkit, which has already reported positive adjusted EBITDA. To bridge this gap and accelerate volume growth, Zepto plans to deploy a significant portion of its IPO proceeds, earmarking ₹1,735 crore for lease liabilities and ₹1,629 crore for opening nearly 1,900 additional dark stores.

The Risks Behind The Growth Story

The biggest allegation Zepto faces today is that it is an inventory-led company masquerading as a marketplace model. With about 65% foreign ownership, Zepto does not meet the criteria to qualify for the more lucrative inventory-led model, which is permitted only for majority Indian-owned-and-controlled companies (IOCC).

The allegation stems from the way Zepto has structured its operations. The company purchases inventory directly from brands, holds those goods on its books, and then sells them to a handful of third-party licensee firms, which in turn sell the products to customers on the Zepto platform. This allows Zepto to effectively control inventory and capture economics similar to an inventory-led retailer while presenting itself as a marketplace facilitating transactions between sellers and consumers. The arrangement is enabled through licensing agreements with entities such as Commodum Groceries, Drogheria Sellers and Geddit Convenience, which pay Zepto licensing fees and act as the merchant sellers visible to customers.

By contrast, Zomato transitioned to an inventory-led model through a more straightforward route. Last year, Zomato proposed capping total foreign ownership in Eternal Ltd. at 49.5%. As of Q4 FY26, its foreign shareholding had fallen sharply to 32.6% from 47%, helping it qualify as an IOCC. Swiggy, meanwhile, continues to operate as a marketplace after failing to secure IOCC status.

Against this backdrop, Zepto's ongoing regulatory scrutiny is likely to attract greater attention from investors evaluating the company's governance and compliance framework ahead of its public listing.

The company disclosed that the Enforcement Directorate (ED) issued FEMA-related summons to founders Aadit Palicha and Kaivalya Vohra in April 2026. The matter remains under review.

Separately, Zepto is facing an ongoing investigation by the Competition Commission of India (CCI) over alleged anti-competitive pricing practices. Both matters remain unresolved ahead of the IPO and could emerge as key concerns for public market investors assessing governance and regulatory risks.

At a time when geopolitical uncertainty continues to weigh on markets and three AI-focused companies with a combined valuation of nearly $4 trillion are expected to attract significant global capital, Zepto's IPO is not just a test of one company's valuation. It is a test of whether public market investors are willing to fund the next phase of India's quick-commerce boom. If they aren't, several startups waiting to list may have to rethink both their timing and their price expectations.