The founders of Indian quick commerce company Zepto Marketplace Pvt. are seeking to raise 15 billion rupees (US$176 million) through a private credit deal, according to sources familiar with the matter.

The company plans to issue rupee-denominated bonds with maturities ranging from two to four years.

The deal may be finalized by the end of June, although the terms have not yet been established, the sources indicated.

The funds raised will reportedly be used to buy back Zepto shares from foreign investors. This aims to increase domestic ownership prior to a planned IPO.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Strategic debt: A calculated pre-IPO ownership restructuring

Zepto’s move to use private credit rather than equity capital reveals a financial strategy tied to IPO regulations.

By raising 15 billion rupees ($176 million) through high-yield bonds rather than additional equity, the founders can repurchase shares from foreign investors without further diluting their ownership stake or control of the company.

This transaction comes after Zepto has already raised substantial equity funding, including $340 million at a $5 billion valuation just months ago and $665 million in June 2024 that doubled its valuation to $3.6 billion within a year 12.

The 16% yield being offered to private credit investors is higher than typical corporate debt, reflecting the founders’ confidence in their business trajectory and the urgency of restructuring ownership ahead of public markets.

For Indian quick-commerce startups, navigating the balance between foreign funding for growth and domestic ownership requirements for IPO eligibility requires innovative financial strategies.

2️⃣ Rapid valuation growth signals investor confidence despite competitive market

Zepto’s ability to double its valuation from $3.6 billion to $5 billion within a year demonstrates growth amid competition in India’s quick-commerce sector.

The company has expanded its market share to 28% while competing against rivals like Blinkit and Instamart 1, validating its rapid-delivery business model despite skepticism about quick-commerce profitability.

Zepto’s operational efficiency is improving alongside its expansion plans, with the company approaching EBITDA profitability while planning to double its dark store network from 350 to 700 locations by March 2025 1.