Zepto raises $350 million in fresh funding amidst growing retail disruption in India

Indian quick-commerce startup Zepto has secured a massive $350 million in new funding, its third round of financing in six months. The investment maintains the company’s valuation at $5 billion and solidifies its position against competitors ahead of a planned IPO next year.

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Key Investors and Funding Details

The latest funding round includes investments from Indian family offices, wealthy individuals, and asset manager Motilal Oswal. Notable backers include Motilal co-founder Raamdeo Agrawal, family offices of Mankind Pharma, RP-Sanjiv Goenka, Cello, Haldiram’s, Sekhsaria, and Kalyan, as well as celebrities Amitabh Bachchan and Sachin Tendulkar.

The new investment is the largest fully domestic primary round in India, with foreign ownership exceeding two-thirds of Zepto’s capital table. The funding push comes as Zepto rushes to add Indian investors to its cap table before a planned IPO next year.

Quick-Commerce Market Growth Prospects

The quick-commerce market in India is expected to surpass $6 billion this year, with Morgan Stanley projecting the market to reach $42 billion by 2030. This represents an impressive growth prospect, with quick-commerce platforms creating a "parallel commerce for convenience-seeking customers" in India.

Established Players Cut Delivery Times

Quick-commerce sales have forced established players like Flipkart, Myntra, and Nykaa to cut delivery times as they lose business to specialized delivery apps. The model seems to be working well in India, where unorganized retail stores are prevalent.

Quick-Commerce Market Prospects and Challenges

Despite its growth prospects, the quick-commerce market faces regulatory challenges. Currently, e-commerce firms are required to have majority Indian ownership to operate on an inventory model. Quick-commerce firms are not compliant with these rules, creating uncertainty for the industry’s future.

Zepto’s Growth Plans and Impact

Zepto plans to go public in India next year, with CEO Aadit Palicha projecting 150% growth over the next 12 months. The startup aims to reach annualized sales of $2 billion by serving a total of more than 7 million orders in over 17 cities daily.

However, the rapid growth of quick-commerce has had a devastating effect on mom-and-pop shops that dot thousands of Indian cities, towns, and villages. Around 200,000 neighborhood stores have closed in the past year, with 90,000 stores shutting down in major cities where quick commerce is more prevalent.

Regulatory Challenges Ahead

Unless regulatory intervention occurs, more neighborhood stores face closure as quick-commerce platforms prioritize growth over sustainable practices. Zepto has created work opportunities for hundreds of thousands of gig workers but will need to address these challenges as it continues to grow.