Zepto is encountering fresh resistance from institutional investors as it prepares for its highly-anticipated initial public offering. While the company has already lowered its valuation expectations from last year's peak, several domestic mutual funds remain unconvinced.
They argue that the proposed pricing still fails to reflect the company's business profile and long-term profitability prospects. The disagreement could complicate the timeline of India's most closely-watched startup listings.
According to reports, Zepto previously achieved a private market valuation of around $7 billion, but has since reduced its IPO expectations to approximately $4 billion - $5 billion. Even at those levels, several institutional investors believe the valuation remains aggressive under prevailing market conditions.
Fund managers are reportedly seeking a further 30%-40% reduction in valuation before committing capital. Their cautious stance reflects a broader shift in India's IPO market, where investors are placing greater emphasis on profitability, sustainable growth and realistic pricing rather than rapid revenue expansion alone.
A major issue investors pointed out is that Zepto has a fairly limited business model. Unlike its listed peers like Swiggy and Eternal (Blinkit), the company continues to focus on fast commerce and does not have any sizable food delivery service.
Market players believe that the lack of another high-traffic vertical makes it difficult for Zepto to have valuations at par with those of its peers. Another factor behind the hesitation is the poor performance various new-age technology firms show post-listing.
Zepto has already submitted updated draft documents with the Securities and Exchange Board of India (SEBI) and is expected to raise more than Rs. 8,000 crore through a combination of fresh equity issuance and an Offer for Sale. The funds are expected to support expansion of its dark-store network and business growth initiatives.
Reports also suggest that the company has intensified discussions with high-net-worth individuals, family offices and institutional investors to strengthen demand ahead of the issue. However, bankers may first need to bridge the gap between Zepto's pricing expectations and investors' valuation benchmarks.
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India's stock market appears alive, with several firms looking to raise capital from investors in the next few months. Zepto’s IPO filing shows how institutional investors are becoming more significant for deciding a company’s valuation.
Although high-growth tech companies are in demand, markets are less willing to pay a premium price without assurance of their profitability. As negotiations are ongoing, the final price and issue will be determined by whether Zepto gains investors’ support.