Whalesbook
As Zepto prepares for an Rs 8,000 crore IPO, brokerage firm Jefferies has raised questions about its financial reporting, noting it differs significantly from competitors like Blinkit and Swiggy Instamart. While the company pursues an aggressive growth strategy with low prices, investors are scrutinizing its high operating losses and the complexity of comparing its performance metrics against industry standards.
What Happened
Zepto, a major player in India’s quick commerce market, is preparing to launch an initial public offering (IPO) aimed at raising approximately Rs 8,000 crore. Ahead of this event, international brokerage firm Jefferies released an analysis highlighting that Zepto’s financial reporting methods differ notably from those of its listed peers, Zomato-owned Blinkit and Swiggy’s Instamart. The brokerage report suggests these differences in how the company calculates and reports key metrics make it difficult for investors to directly compare Zepto's performance against its competitors.
The Metric Challenge
For investors, comparing similar businesses is vital to understand which company is performing better. Jefferies pointed out that Zepto’s draft filing uses reporting metrics that are not standard across the industry. While peers typically report figures like Monthly Transacting Users (MTU) and Net Order Value (NOV) to show customer activity and sales, Zepto has chosen to focus on Net Revenue Value (NRV) and Annual Transacting Users (ATU).
Furthermore, the revenue models differ. Competitors largely follow a commission-based framework where they take a cut from the goods sold. Zepto’s reporting reflects a wholesale-led structure. Because of these differences in reporting styles, retail investors may find it challenging to benchmark Zepto’s progress against the established metrics of other quick commerce companies.
Business Model and Pricing Strategy
Zepto has positioned its business around an Every Day Low Pricing (EDLP) strategy. The goal is to drive high-frequency shopping by offering competitive prices, a philosophy the brokerage compares to the retail approach of DMart. While this strategy has helped Zepto capture an estimated 35% of the total order share among the top three players, it comes with a challenge.
Zepto’s average order value stands at approximately Rs 360, which is noticeably lower than the Rs 500-525 range seen at Blinkit and Instamart. In the quick commerce business, where delivery costs are often fixed per trip, a lower order value means the company earns less profit per delivery compared to its peers. This makes the company's ability to increase order values a key factor for future profitability.
Profitability and Expansion Risks
Investors are closely watching the company’s path to profitability. The brokerage noted that while Zepto has successfully reduced its losses on each order—dropping to Rs 59 per order in the fourth quarter of FY26—the overall financial picture shows substantial operating losses. The total adjusted EBITDA loss for FY26 was nearly Rs 5,000 crore, with Rs 1,240 crore lost in the fourth quarter alone.
Zepto intends to use the funds from the IPO to significantly expand its network of dark stores and meet lease obligations over the next four years. While this growth strategy is intended to capture more market share, it also creates an execution risk. The company’s success depends on its ability to scale quickly, keep operations efficient, and manage the high costs of maintaining a widespread delivery network.
What Investors Should Track
Looking ahead, the primary focus for market participants will be how Zepto navigates the tension between aggressive expansion and the need for sustainable profits. Investors may track whether the company can bridge the gap in reporting metrics to allow for a clearer comparison with peers. Additionally, the ability to improve the average order value and manage the high cash burn associated with new dark stores will be critical monitorables. The ultimate success of the IPO will likely hinge on the company’s ability to demonstrate a clear and believable timeline for turning operating losses into consistent profits.
