Ahead of IPO, Zepto Secures ₹1,500 crore Edelweiss Investment to Boost Indian Ownership

Zepto founders Aadit Palicha and Kaivalya Vohra are finalizing plans to raise about ₹ 1,500 crore (over $175 million) through structured debt backed by Edelweiss. The move aims to enhance Indian ownership ahead of the company’s anticipated IPO, as reported by The Economic Times on Monday. The investment in the quick commerce platform aims to buy back shares from foreign investors and strengthen domestic control.

Zepto’s Structured Debt Funding Strategy

Palicha and Vohra are close to finalizing a deal to raise ₹1,500 crore (over $175 million) through Zepto’s structured debt funding. Edelweiss has already submitted a binding bid and will anchor half the funding. The rest will come from domestic family offices and small credit funds.

The structured loan carries a minimum interest rate of 16%, with an equity-linked upside that could push overall returns to around 18%. The debt is structured for three years and is expected to close by July.

According to a source, “Edelweiss has given a binding term sheet and will anchor the raise by committing half of the amount. The remaining ₹750 crore is being raised from family offices and smaller credit funds, who are expected to come in on the same terms.”

This deal values Zepto at around $5 billion, the same valuation as its previous equity round last year.

Boosting Indian Shareholding Before Zepto’s IPO

Beyond fundraising, Zepto’s key focus is to align with regulatory requirements. Currently, Palicha and Vohra hold about 18% of the company. After this structured debt funding, their combined stake is expected to rise to about 20%.

Overall, the company’s Indian shareholding will cross 30% once the deal is completed. The move is crucial because India’s foreign direct investment (FDI) rules allow 100% foreign ownership in online marketplaces, but not in inventory-led businesses. To run an inventory-led business legally, a company must be Indian-owned and controlled, with more than 50% Indian ownership.

“The deal is aimed at acquiring shares from existing foreign investors to help consolidate domestic ownership ahead of the IPO,” said a person familiar with the matter.

Key investors in Zepto currently include Nexus Venture Partners, Y Combinator, and General Catalyst.

A Rare Move Among Indian Startups

Raising capital through personal debt is a rare move for Indian tech startups, which usually avoid pledging founder equity. This decision by Zepto seems essential considering both tight capital conditions and heavy cash burn within the quick-commerce industry.

The approach follows a pattern that Byju’s, PharmEasy, and Oyo have previously followed. However, not all succeeded. Byju’s defaulted on its loans, which pushed the company toward bankruptcy, and PharmEasy suffered an overwhelming 90% reduction in valuation.

The structured debt funding lays the foundation for Zepto while it carries out a $250 million secondary deal, led by Motilal Oswal Financial Services, with other private equity firms. This secondary transaction will further clean up the company’s ownership structure before filing for the IPO.

Zepto recently merged its Singapore-based parent Kiranakart with its Indian arm and renamed it Zepto Pvt Ltd. The “reverse flip” represents a broader movement by Indian startups that need to list their stocks on the domestic markets.

Aadit Palicha shared through LinkedIn that Zepto achieved a nearly $4 billion annual gross order value with a 300% increase in sales during the year. His report included information about significant EBITDA losses reduction (after ESOP cost elimination) and major cuts in operating cash burn over three months.

Palicha added, “We are targeting to break even on both EBITDA and cash flow fronts soon.”

Zepto is facing direct competition from Blinkit and Swiggy Instamart in the expanding q-commerce market. A report stated that the sector’s monthly cash burn has risen to between ₹1,300 crore and ₹1,500 crore due to intense competition.

By securing Edelweiss’ investment and consolidating domestic ownership, Zepto is positioning itself strongly for its upcoming IPO.