Quick commerce startup Zepto has put its IPO plans on hold to pursue a ₹1,000 crore pre-IPO funding round from existing investors. The decision follows pushback from institutional investors regarding the company's valuation and high cash burn rate. The capital raised will be deducted from the eventual public issue size.
Quick commerce player Zepto has decided to temporarily pause its initial public offering (IPO) plans. Instead, the company is shifting its strategy to secure more than ₹1,000 crore through a pre-IPO funding round. This capital infusion is intended to bolster the company's balance sheet before it makes another attempt to tap public markets.
Funding Strategy and Regulatory Path
The proposed funding round is expected to see participation from existing backers, including Glade Brook, General Catalyst, Goodwater Capital, and Nexus Venture Partners. According to market regulations, companies preparing for an IPO are allowed to raise up to 20 percent of their planned fresh issue size via a pre-IPO placement. It is important to note that any amount raised through this current effort will be subtracted from the company's total IPO size whenever it eventually launches. By opting for this route, the company is effectively delaying its public debut while securing necessary liquidity.
Valuation Adjustments and Investor Feedback
Zepto’s path to the public market has faced pressure regarding its valuation. Initially, the company aimed to raise a much larger sum through its IPO. However, feedback from institutional investors, including domestic mutual funds such as SBI Mutual Fund, ICICI Prudential, Kotak, and HDFC, highlighted concerns over the company's financial metrics. While Zepto had previously seen valuations reaching $7 billion in private markets, recent discussions with prospective public market investors suggested a lower valuation range. The company is now reportedly looking to raise this new capital at a valuation between $4 billion and $4.2 billion.
Monitoring Cash Burn and Financial Health
For investors, the primary area of focus remains Zepto's cash burn rate. The company has historically faced high operational expenses, with quarterly spending previously crossing the ₹900 crore mark. Although recent reports indicate this burn rate has moderated to approximately ₹700 crore per quarter, the pace at which the company consumes its cash reserves remains a critical metric for potential shareholders to track. With a limited cash runway, the company's ability to demonstrate a clear path toward sustainable profitability will be essential before it can successfully approach public market investors again. The next major update for stakeholders will be the successful closure of this pre-IPO round and any subsequent management commentary regarding the revised timeline for its public listing.