Amid Retail Shifts in India, Zepto Attracts $350M in Fresh Funding

Zepto, the rapidly growing Indian quick-commerce startup, has raised an impressive $350 million in its third funding round in just six months. This latest round cements the company’s position in the highly competitive quick-commerce sector, helping to fuel its aggressive growth plans ahead of a planned Initial Public Offering (IPO) next year. The investment round, which maintains Zepto’s $5 billion valuation, attracted participation from a mix of influential Indian family offices, wealthy individuals, and notable institutional investors, including Motilal Oswal, a well-known asset management firm in India. Some of the prominent investors include Raamdeo Agrawal, co-founder of Motilal Oswal, as well as family offices from major Indian businesses such as Mankind Pharma, RP-Sanjiv Goenka Group, Cello, Haldiram’s, Sekhsaria, and Kalyan. The funding round also saw participation from Indian celebrities such as Amitabh Bachchan and Sachin Tendulkar, underscoring the confidence the startup has inspired across various sectors.

This latest capital infusion comes as Zepto looks to strengthen its position in the market by increasing its domestic investor base. Currently, foreign investors hold over two-thirds of Zepto’s equity, and the company is keen to shift the balance. With a total of $1.35 billion raised since June, Zepto is aggressively positioning itself in the fast-evolving Indian quick-commerce landscape, which is set to surpass $6 billion in market size by the end of this year. The quick-commerce sector in India has been gaining traction, fueled by the growing demand for faster delivery of groceries and daily essentials. Morgan Stanley projects the Indian quick-commerce market will hit $42 billion by 2030, representing a significant portion (18.4%) of total e-commerce and 2.5% of retail sales. These numbers highlight the immense growth potential of the sector and the opportunities it offers to companies like Zepto.

Zepto and its competitors, such as Zomato’s Blinkit, Swiggy’s Instamart, and Tata’s BigBasket, are reshaping India’s retail landscape by focusing on speed and convenience, offering deliveries in as little as 10 minutes. This model has proven especially effective in India, where millions of small, unorganized retail stores dominate the market. The convenience provided by quick-commerce platforms is attracting an increasingly large customer base, creating a parallel retail ecosystem. Morgan Stanley notes that this new model of quick-commerce is not only challenging established players but is also reshaping consumer behavior, as more people seek faster, more reliable delivery options for their everyday needs.

However, the rise of quick-commerce has come with its own set of challenges, particularly in terms of profitability. Despite rapid growth, platforms like Zepto are currently operating with lower margins than traditional retail models. Morgan Stanley forecasts that while the industry as a whole is operating at low margins, leading players like Zepto could see contribution margins of 7-8% and adjusted EBITDA margins of over 5% by 2030, which represents an optimistic but achievable growth path for these companies. As of now, Zepto’s monthly expenses are estimated at around $35 million, according to sources close to the company. Despite these costs, Zepto is on track to achieve annualized sales of $2 billion, with projections for 150% growth over the next 12 months, driven by its expanding customer base and improved operational efficiencies.

Zepto’s current customer base spans 17 cities, with the company fulfilling more than 7 million orders daily. The startup is striving to maintain momentum by focusing on providing superior customer experiences and expanding its service offerings across the country. CEO Aadit Palicha, in an investor presentation, outlined the company’s ambitious plans to expand rapidly, with projections to continue its fast-paced growth trajectory in the coming year. Zepto’s upcoming IPO will be a key milestone in its growth story, allowing the company to tap into public markets for additional capital to fuel its expansion and improve its competitive positioning against rivals.

However, Zepto’s rise has had a detrimental impact on traditional retail businesses, particularly small, family-owned stores. According to the All India Consumer Products Distributors Federation, approximately 200,000 neighborhood stores have shut down in the past year alone, with 90,000 closures concentrated in major cities where quick-commerce platforms are most prevalent. The federation has expressed concerns that, unless regulatory interventions are made, more local businesses will face extinction as they struggle to compete with the rapid growth and convenience offered by quick-commerce platforms. This has sparked a debate about the sustainability of the quick-commerce business model, with critics arguing that platforms like Zepto are prioritizing growth over long-term viability and fair competition.

Despite these concerns, Zepto is keen to emphasize its role in contributing positively to the economy, particularly through job creation. The company has created employment opportunities for hundreds of thousands of gig workers, which Palicha highlighted as a core part of the company’s mission. “From day one, our vision has been to play a small role in nation-building, create lakhs of jobs, and offer better services to Indian consumers,” said Palicha in a statement. This job creation narrative is central to the company’s public relations strategy, as it seeks to balance the negative impact on traditional retail with its positive contributions to the gig economy.

Nonetheless, Zepto and other quick-commerce firms face looming regulatory challenges. In India, e-commerce companies are restricted from operating an inventory model unless they are majority-owned by Indian nationals or Indian entities. This rule has made quick-commerce startups like Zepto non-compliant with current regulations, presenting a potential barrier to their continued growth and expansion. These regulatory hurdles are adding another layer of complexity for Zepto as it seeks to maintain its competitive edge while navigating the evolving legal landscape.

As the quick-commerce market in India continues to grow at a rapid pace, the sector faces several key challenges: balancing growth with sustainable practices, maintaining profitability, and navigating an increasingly complex regulatory environment. Zepto’s performance in the coming months will likely determine whether it can maintain its momentum and successfully transition to a publicly listed company, making it one of the most closely watched startups in India’s fast-evolving e-commerce ecosystem.