Zepto's $1B IPO test: Rs 5,000 crore losses vs scale promise

Key Takeaways

• Zepto reported Rs 5,000 crore in adjusted Ebitda losses in FY26, far exceeding Blinkit's Rs 277 crore and Instamart's Rs 3,500 crore
• Per-order losses narrowed from Rs 136 to Rs 79, showing improving unit economics despite the overall burn
• Average order value at Rs 357 trails Blinkit (Rs 530) and Instamart (Rs 490), a direct result of Zepto's low-price strategy

Zepto's upcoming $1 billion IPO will force investors to answer a straightforward question: can a quick commerce company burning Rs 5,000 crore annually reach profitability before the cash runs out? The answer depends on whether you believe scale alone can fix the math.

According to Zepto's draft red herring prospectus, the company processed 640 million orders in FY26 through 1,139 dark stores across 66 cities. That puts it second only to Blinkit's 917 million orders. But order volume tells only part of the story.

Why does Zepto lose more money than its rivals?

Zepto's low-price strategy drives volume but crushes margins. Jefferies estimates Zepto's average order value at Rs 357, compared to Rs 530 for Blinkit and Rs 490 for Swiggy Instamart. Smaller baskets mean less revenue per delivery, while the cost of picking, packing, and delivering stays roughly the same.

The result: Zepto posted adjusted Ebitda losses of Rs 5,000 crore in FY26. Instamart lost Rs 3,500 crore. Blinkit, now part of Zomato, lost just Rs 277 crore. Zepto accounts for 35% of order volumes among the top three but captures a smaller share of net order value.

Is the unit economics trajectory improving?

Yes. Zepto's per-order loss dropped from Rs 136 in FY25 to Rs 79 in FY26, a 42% improvement. The company attributes this to supply chain efficiency gains and lower marketing spend. Jefferies noted that free cash flow losses also narrowed during the year.

The company handles about 1.8 million orders daily with 48 million annual transacting users. Those numbers suggest real consumer demand exists. The question is whether that demand can be served profitably.

"Investors will be looking at the trajectory of monetisation and margin improvement rather than growth alone," an internet sector analyst told ET. "The company has demonstrated demand at scale. The next phase will be judged on operating leverage and profitability."

How crowded is the quick commerce market getting?

Extremely. Amazon plans to scale its quick commerce network to roughly 1,000 dark stores. Flipkart is targeting 1,600 dark stores by the end of 2026. Reliance Retail already serves over 5,100 pin codes across 1,200 cities.

Data from Kotak Institutional Equities shows the top three players ended FY26 with 4,525 dark stores combined and gross merchandise value of about Rs 92,000 crore, nearly double the previous year. Together, Zepto, Blinkit, and Instamart processed almost 2 billion orders.

This is not a market where competition is easing. Amazon and Flipkart are using discounts and cashback offers aggressively. Kotak reports that Zepto continues offering free deliveries at lower minimum order values than competitors.

What are rivals saying about profitability pressure?

Swiggy's founder Sriharsha Majety offered a blunt warning in late May. "If you go unchecked on economics for too long and if you have to correct when the market has slowed down dramatically, the music stops very hard," he told ET. Swiggy has prioritized unit economics, he said.

Blinkit and Instamart have both become "more measured on pricing and incentives," according to brokerages. That leaves Zepto as the most aggressive on price, a position that generates volume but raises questions about sustainability.

“To some extent scale is important for the model to work. However, everything may not be related to scale. Even today, Zepto has close to a 19% market share within quick commerce, which is not insignificant. The bigger challenge is take rates and average order value.”

— Karan Taurani, Executive Vice President, Elara Securities

Can Zepto raise prices without losing customers?

This is the central tension. Zepto's low-price positioning has attracted users who might defect if prices rise. But the company cannot sustain Rs 5,000 crore annual losses indefinitely, even with fresh IPO capital.

Average order value is the lever that matters most. Raising it from Rs 357 toward Blinkit's Rs 530 would dramatically improve unit economics. But that likely requires either higher prices, better product mix, or reduced discounting. Each carries risk.

The IPO prospectus gives investors a clear view of the numbers. What it cannot answer is whether Zepto's 48 million transacting users will tolerate the monetization changes needed to reach profitability.

Frequently Asked Questions

How much is Zepto raising in its IPO?

Zepto is targeting a $1 billion IPO, making it one of the largest Indian startup public offerings of 2025.

Why is Zepto's average order value lower than competitors?

Zepto follows an everyday-low-price strategy that prioritizes purchase frequency and affordability over larger basket sizes. This results in an AOV of Rs 357 versus Rs 530 for Blinkit.

How many dark stores does Zepto operate?

As of March 2026, Zepto operated 1,139 dark stores across 66 cities in India, processing about 1.8 million orders daily.

Is Zepto profitable?

No. Zepto reported adjusted Ebitda losses of Rs 5,000 crore in FY26, though per-order losses improved 42% year-over-year from Rs 136 to Rs 79.

Who are Zepto's main competitors?

Zepto competes primarily with Zomato's Blinkit and Swiggy Instamart. Amazon, Flipkart, and Reliance Retail are also expanding aggressively into quick commerce.

Source: Tech-Economic Times / ET