India's quick-commerce market is preparing for one of its most closely watched public listings as Zepto is waiting for the time to come. While the company has become a great challenge to market leader Blinkit and has widened its lead over Swiggy Instamart in some of its key performance metrics, investors are asking a key question: How can Zepto turn its meteoric growth into sustainable profits?
The company has expanded drastically in one year. According to its updated draft red herring prospectus (DRHP), Zepto’s net receivables value (NRV) soared, and its order volumes increased dramatically as the company began to establish its dark stores across India. Zepto received almost twice as many orders as Instamart in the March quarter, and its scale gap with Blinkit was even smaller.
But Jefferies and other market observers have noted that profitability is still the biggest challenge facing the company as it moves toward the public markets.
Growth is Strong, But Losses Still High
And while Zepto’s revenue growth has been one of the fastest in quick-commerce, its losses are still much higher than those of its major rivals. The company posted adjusted EBITDA losses of about ₹1,248 crore in the March quarter versus Instamart’s ₹858 crore loss. Blinkit did, however, make an adjusted EBITDA profit during the same period.
That’s a big reason people don’t like Zepto’s IPO prospects. Investors are more likely to reward growth in general, but public markets are still looking for a clear path to profit, and profits are more important in sectors that require investment (like quick commerce).
Blinkit appears ahead in Profitability
Blinkit has established itself as the benchmark in the fast-moving space in India. The competition is tough, but Blinkit is able to move closer to sustainable profitability and this has increased investor confidence in its business model. As analysts say, its bigger scale and more mature business model and unit economics make it something Zepto is still trying to achieve.
Zepto has certainly reduced the gap in order volumes and customer activity, but converting those transactions into profits remains a work in progress.
Advertising Could be a Major Revenue Driver
Zepto’s advertising business is one of the bright spots in Zepto’s financial story. The business’s ad revenues are growing quickly and therefore, are more and more important income. And advertising revenue is much better economics than grocery delivery and thus is a key part of Zepto’s path toward profitability.
And the company is also spending a lot of money on subscriptions, customer retention programs and higher-frequency shopping, all to increase margins over time.
Question of Transparency and Metrics
But some analysts have also expressed concerns regarding the disclosure of certain operational metrics. Zepto's IPO documents do not include some of the metrics used by other listed companies, making comparisons with Blinkit and Instamart more difficult. Many investors were concerned that the company’s valuation and future prospects are not as transparent as they should be.
What Investors Should Watch
As Zepto approaches its market debut, investors will probably be focused on a few points:
- Progress toward profitability
- Expansion of high-margin advertising revenue.
- Store-level economics and operating efficiency.
- Customer retention and order frequency.
- Competitive pressures from Blinkit and Instamart
The company’s growth story is impressive. Revenue, orders and customer adoption continue to grow rapidly and Zepto is now one of India’s fastest-growing consumer internet companies. But the IPO’s ultimate success may depend less on how fast it grows and more on how it can convert that growth into profits.
Zepto is at a turning point for now. It has been shown to scale. The next challenge is to prove that it can make money in a fiercely competitive digital sector that has become one of the most fiercely competitive digital markets in India.
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