Optimistic about IPO in 2025, Zepto CEO says claims of quick commerce hurting Kiranas not data-backed

Fresh out of bumper USD 350 million funding this time from marquee domestic investors, quick commerce company Zepto says it is on a clear path to becoming a full Indian-owned entity and hitting PAT positive milestone, as co-founder and CEO Aadit Palicha exudes optimism about a possible IPO in 2025.

In an interview with PTI, Palicha strongly countered allegations about the quick commerce model disrupting and stunting the growth of traditional kirana stores. He asserted that these and other "narratives" are not grounded in real data and underrate the "net positives" achieved so far by the industry, including job creation.

Palicha further said that instant 10-minute delivery models like that of Zepto have generated lakhs of jobs, been wage-additive, and created all-around "value" for both consumers and workers.

Moreover, the quick commerce model executed at a scale for groceries and items of daily use is unseen, unmatched globally, he said adding that this goes to showcase the unique strengths of Indian technology.

Armed with data and numbers, Palicha refuted allegations that have been levelled by a group of retail distributors including around predatory pricing, saying that 99.8 per cent of products sold on the platform were above cost.

"So the predatory pricing allegation similar to the other 'data-free narratives' created about quick commerce over the past few years, doesn't actually stack up and we are happy to have anyone who doesn't believe it to come to our office and take a look at our books because it is a mathematical fact," he said.

On key issues like food quality safety, he admitted there have been concerns about how the industry can make the processes more consumer-friendly. Palicha said that the industry welcomes the scrutiny, and added the company's own interests are aligned with the customers.

"So we're not at loggerheads with FSSAI...We look at them as a partner that can help us serve our customers better," he said.

Citing some estimates, Palicha said that India is poised to see over USD 200 billion dollar of incremental consumption.

"It is economically impossible that the kirana store is shrinking... We are growing but so are the kirana stores, and so are other formats of commerce," he said.

According to him, allegations around predatory pricing "do not stack up" either.

"The reason why such narratives are particularly dangerous is because it actually hides from all the net positive we've done for the country," he said.

A case in point is that the quick commerce industry in three years has created 4.5 lakh jobs, he said adding that average wages at over Rs 20,000 too are at a level "meaningfully higher" than jobs in the informal sector.

"...Most importantly, this is Indian technology, it's a real infrastructure. I think it's a fantastic thing, and we should be celebrating new Indian technology. Nowhere else in the world at scale you can tap a button on your phone and get your day-to-day essentials like shampoos and rice delivered in 10 minutes," he said.

The round included investments from Indian HNIs, family offices, and leading financial institutions. The fundraise was led exclusively by Motilal Oswal's Private Wealth division.

Palicha said the purpose of the round was purely to increase domestic ownership on the way to IPO sometime in the calendar year 2025.

"That's our ambition...Of course, capital markets may change, but for now we're optimistic if the business continues to perform as well, that we will go public in calendar 2025," he said.

On the status of the company's plans of shifting domicile to India from Singapore, Palicha said the company is moving swiftly on that and all boxes are either checked or close to being checked.
"We're willing to commit that within the next financial year, sometime in FY26 we will become a full Indian-owned company... That's our ambition and objective, and it looks quite likely that we're going to get there...So what I can tell you is that we will be a domestic company within the next financial year" he said.

With business growing rapidly, Zepto is looking to expand to over 50 cities by next quarter, taking its footprint over and beyond about two dozen cities right now.

"In April-May 2024 we hit a billion dollars in top line. We're already multiplied on that base, and we expect to continue to multiply. Very soon we (will) make another large milestone on hitting another big top-line threshold...We are growing rapidly and multiplying on a scale of billions of dollars in the top line, one of the fastest-growing consumer companies in the country right now," he said.

As per Palicha, more and more stores are turning profitable, and within shorter time spans of 23 months profitability timelines have come down to 8 months.

"In the next financial year, we will be PAT positive. We are quite confident and that hopefully will be a positive signal to the markets," he said.

Palicha said the company is seeing "phenomenal results" on Zepto Cafe, which is margin additive and increasing customer stickiness and retention for the core business.

"We will get to Rs 1,000 crore business in Zepto Cafe alone...Customers love it. It's giving us more frequency and retention in the core business...People are opening the app multiple times," he said.

On competition from rivals like Blinkit and Swiggy Instamart, he said competition is a "good thing" and pointed out that the market is "genuinely quite large".

"There is plenty of room for everybody, so we feel good about it, in a nutshell, and we just focus on our own execution... We don't think too much about competition, and we think the market is large enough," he said.