New investors Dragon Fund and Epiq Capital joined the round while existing investors StepStone, Lightspeed, DST and Contrary increased their stakes.
The Mumbai-based company has raced its way to bag some of the biggest funding rounds so far this year, as it reshapes India’s e-commerce sector forcing giants including Walmart-backed Flipkart and Tata’s BigBasket to venture into instant deliveries.
Also read | Zepto eyes large orders with dark store expansion
According to Aadit Palicha, founder and chief executive officer of Zepto, the new round will enable the firm to strengthen its balance sheet as it gears up to deliver “robust growth and operating leverage.”
“While these recent financings reflect strong confidence in Zepto’s performance to date, we recognize there is still a lot of execution ahead of us to fulfil our ambition of building a world-class internet company out of India. At Zepto, we genuinely feel we are just at the beginning of our journey,” Palicha said on Friday.
The deal also marks one of the first investments by General Catalysts following the acquisition of Venture Highway. The merged entity plans to invest $500 million to $1 billion across early- and growth-stage investments in the country, Mint had reported in June.
Zepto, which is gearing up for a public market listing next year, had gained its coveted unicorn status a year ago, when it raised $200 million at a valuation of $1.4 billion.
India’s quick-commerce market grew 77% in 2023 to reach $2.8 billion in gross merchandise value (GMV), accounting for 5% of India’s overall e-commerce market, according to consulting firm Redseer.
Also read | Zepto likely to become bigger than D-Mart in 18-24 months: CEO Aadit Palicha on growth plan
GMV, a key metric in e-commerce, tracks the total value of all the goods sold on a platform, not including discounts and other expenses.
Palicha and Kaivalya Vohra founded Zepto in April 2021, when covid curfews had made people in India’s large cities accustomed to buying daily staples online.
The four-year-old startup is now gearing up for an initial public offering of its shares next year, aiming for a multi-billion-dollar listing, Palicha had told Mint in June.
Over the past few months, Zepto, Blinkit and Swiggy’s Instamart have fuelled demand for instant deliveries, growing their network of dark stores and expanding their range of products.
Zepto said it plans to use the capital to double the number of its dark stores, or warehouses, to 700 by March 2025. Meanwhile, Zomato’s quick commerce business Blinkit, the market leader, plans to establish 2,000 by the end of 2026.
Analysts, however, worry that quick commerce’s potential is limited to metro cities, which is likely to impact players in the long run.
“In the next 2-3 years, penetration in the metro cities may witness a plateau,” Karan Taurani, analyst at Elara Capital, told Mint, adding that rising competition in the segment will require firms to be capital-rich and invest sufficiently in expanding in non-metro cities as well as technological capabilities.
Quick commerce versus kiranas
The quick commerce rush has resulted in the influx of many players including Flipkart and Tata-owned BigBasket, leading to complaints from retail distributors about the viability of small mom-and-pop stores being undermined.
Mint reported earlier this week that many kirana owners believe their stores have been reduced to window-shopping avenues, resulting in a drop in order volume and footfall.
Last week, a national distributors’ association—All India Consumer Products Distributors Federation (AICPDF)—wrote to trade and industry minister Piyush Goyal expressing concerns over the popularity of quick commerce.
Read more | Zepto’s ad revenue, loyalty programme rev up growth as quick commerce booms
