Managed this fundraise because of biz performance: Zepto CEO Aadit Palicha

We have been able to raise this round purely because of business performance. We are growing 140 per cent year-on-year, said Palicha

After raising $665 million, this year’s largest funding round, at a valuation of $3.6 billion, quick commerce major Zepto is gearing up for an initial public offering (IPO). AADIT PALICHA, co-founder and chief executive officer (CEO), tells Aryaman Gupta the company is close to turning profitable, even as it looks to expand into newer markets. Edited excerpts:

How was Zepto able to raise such a large round when funding is hard to come by?

Because of business performance. We are growing 140 per cent year-on-year and have gone from about $500 million in sales to well over $1 billion over around three quarters. We are the fastest company in internet history to hit this milestone.

How do you plan to use the money?

We are in a healthy place even with the cash we have in the bank. We look at this more as pre-IPO financing. We are confident the IPO will happen in 2025.

Some of the equity will be used in capex and expansion into new markets. However, we are generating meaningful profit from mature stores. The idea is to reinvest the profits we are making from these stores in newer businesses. Most of the investment in new stores, new markets, or customer acquisition will come from our existing profits.

How close is Zepto to achieving profitability?

We have been able to turn 75 per cent of our stores fully positive on Ebitda (earnings before interest, tax, depreciation and amortisation) and free cash flow. These stores, which previously took 23 months to achieve profitability, take six months today. The company is close to turning Ebitda positive overall, and we have brought down the burn to a relatively low level. The metric we focus on is gross margin per order, which, for us, has been in line with best-in-class in the industry. We are doing about 600,000 orders a day. Before we become a public company, we want to generate meaningful Ebitda. If we were not launching new stores, we would achieve an Ebitda breakeven as early as this quarter. But since we are expanding, although not dramatic, there will be a little bit of fluctuation.

What are some of your expansion plans?

We are planning to launch in 10 more cities and increase our store count from 350 to 700 by March 2025. We also plan to hire 400-500 people, focusing on engineering, product, category, growth, and marketing roles. We have a team of 1,600 people.

Players like Blinkit are doing well, and larger incumbents like Flipkart and Reliance are hinting at entering quick commerce. Where do you see the market heading?

This is probably the least competitive period we have had since we started the company. There were many more players 18-24 months ago. And even at the most intense competitive periods, the company continued to perform well. Most of the outcome will be determined by execution. Players that are not executing well will continue to lose market share and scale.

How are your new initiatives -- like Zepto Pass, Zepto Café and Relish -- performing?

We have over 4.5 million Zepto Pass users, and we are seeing meaningful returns from it. On a net basis, Zepto Pass customers are profitable and are spending more. We are going to expand Relish and Zepto Café as well. They have both grown meaningfully over the past 12 months.

Does Zepto plan to get into categories with higher average selling prices, like big-ticket electronics?

We are not planning to do many big-ticket electronics and are looking at more low-ticket appliances and electronics like earphones, power banks, and charging cables, not really smartphones or laptops.

Players like Blinkit faced challenges expanding into Tier-II and beyond markets. What is Zepto’s strategy?

With a lot of players in quick commerce, in both metro and non-metro markets, we have seen stores shutting down when things haven’t gone right. On the other hand, we have shut down only one store. We have a tight geo-selection and network design process. We consider several factors such as road patterns, traffic data, demand density, weather patterns, real estate prices, and population density before we set up dark stores. We are planning to implement this in newer geographies.