This will bring the total funds raised to nearly $1 billion in two successive rounds for the three-year-old company. It raised $665 million from a group of investors in late June. more than double its valuation to $3.6 billion $1.4 billion in August last year. In one year, Zepto has seen its valuation increase by more than three and a half times, helped by rapidly increasing demand for fast trading.
Mars growth Capital, co-led by Mitsubishi UFJ Financial Group Inc and Israel’s Liquidity Group, will participate in the next round joining U.S.-based General Catalyst and other existing investors of the Mumbai-based firm for which a term sheet has already been signed, people briefed on the matter said.
Existing investors and some wealthy individuals could also contribute funds in this round, potentially bringing the total size of the round to $350 million. According to people briefed on the terms, Zepto cannot raise more than $350 million in a new round within 90 days of the previous round, even at a higher valuation under the terms of the funding, to protect existing investors from dilution of their stake.
“The term sheet was signed on Friday and should close in a couple of weeks. Mars Growth is investing around $50 million, while General Catalyst is investing around $200 million and the rest will be provided by others,” one of the people said.
Mars Growth is an investor in Indian unicorns such as B2B manufacturing company Zetwerk and edtech firm Eruditus. General Catalyst is an investor in Cred. General Catalyst’s Neeraj Arora will join Zepto’s board as part of this round, according to terms seen by ET. Arora, former chief business officer at WhatsApp, joined the Silicon Valley-based firm following its acquisition by local early-stage fund Venture Highway in June.
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An email sent to Mars Growth seeking comment went unanswered, while Zepto founder Aadit Palicha declined to comment. American tech publication The Information first reported on Zepto’s additional fundraising at a $5 billion valuation on June 25.
Once formally closed, Palicha, the 22-year-old Stanford dropout, and classmate Kaivalya Vohra would have raised $1.5 billion in total.
In June, new investors including DST Global, Avenir Growth Capital, Lightspeed Venture Partners and Avra invested in Zepto, which is based in Singapore and plans to move its headquarters to India, with plans to launch an IPO in the works. DST Global is an investor in Swiggy, which runs Instamart.
“We would like to be a public company in a relatively short timeframe… we see this funding as a balance sheet building exercise in preparation for an IPO,” Palicha told ET after his $665 million fundraise.
Who will blink first?
The latest funding will give Zepto more ammunition to take on bigger rivals like Blinkit and Swiggy Instamart, besides new entrant Flipkart Minutes. Tata Digital-owned BigBasket offers fast delivery services through BB Now.
Blinkit, owned by Zomatois It is valued at between $12 and $13 billion. by global brokerages following a surge in June quarter sales. Blinkit has announced a Aggressive expansion to 2,000 dark stores by 2026According to Zomato’s June quarter results, Blinkit has a gross order value fill rate of over $2.3 billion. Zepto’s annualized gross sales run rate is around $1.5 billion and it is expanding strongly to boost it. Zepto is on track to set up 700 dark stores by March 2025. Blinkit aims to have 1,000 dark stores by March 2025.
“Zepto’s expenses have already increased due to the intense rivalry. Blinkit made its intentions clear in its June quarter results on expansion and is taking the battle head-on, while Flipkart has also started its express service from Bengaluru,” said a person familiar with the market dynamics.
Flipkart had offered a majority investment deal to Zeptobut talks failed and the company opted for financial investors, ET reported on April 19.
Zepto’s new stores will be slightly larger, spanning around 4,000 square feet, compared to its current 3,500-square-foot stores, according to current plans. “The company’s assortment, meanwhile, has been expanded from 3,000 stock-keeping units (SKUs) to 10,000 SKUs and will continue to expand,” Palicha told ET in June.
“(Zomato) expects GOV (gross order value) per store (for Blinkit) to continue to increase despite increasing store count… If Zomato were to deliver on this guidance, our FY27 GOV for Blinkit would be higher by approximately 30%, with an implied FY24-27 GOV CAGR of 78% (vs. 64% in the base case),” Goldman Sachs said in a recent brokerage report. Jefferies said Blinkit is the market leader in the fast-growing express commerce space and is poised to see marked margin improvement at steady state.
Swiggy’s largest investor Prosus in its 2023 annual report said: Instamart witnessed an improvement in unit economics as a result of “larger basket sizes, an expanded user base and improved operational efficiency.”
In fast-trade companies, they have been rapidly diversifying into categories such as electronics, beauty and personal caretoys, stationery and home appliances, which were previously the domain of e-commerce platforms like Flipkart and Amazon.
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