Zepto founders Aadit Palicha and Kaivalya Vohra are reportedly in advanced discussions with Edelweiss Alternative Asset Advisors, several domestic family offices, and smaller credit funds to secure a structured debt deal worth approximately ₹1,500 crore (over $175 million), according to sources familiar with the matter.
The purpose of the funding is to repurchase shares from existing foreign investors, allowing the quick commerce firm to boost Indian ownership ahead of its anticipated IPO.
Sources said Edelweiss has already submitted a binding offer. The loan is expected to carry a minimum interest rate of 16%, with an equity-linked component that could raise total returns to around 18%.
The transaction is said to be taking place at a valuation of nearly $5 billion—the same valuation Zepto received during its last equity funding round.
The transaction, with a tenure of three years, is expected to close by July and will see Edelweiss underwriting the bulk of the loan. “Edelweiss has given a binding term sheet and will anchor the raise by committing half of the amount,” said a person with knowledge of the matter. “The remaining Rs 750 crore is being raised from family offices and smaller credit funds, who are expected to come in on the same terms.”
According to a source, investors could earn up to an 18% return depending on Zepto’s IPO valuation.
An Edelweiss spokesperson declined to comment, while Zepto did not respond to inquiries.
The structured financing at the promoter level is expected to help Zepto’s founders increase their ownership stake from the current 18% to approximately 20%, said another person familiar with the discussions.
Once the deal is completed, Zepto’s overall domestic shareholding could rise to over 30%, according to a source. The startup’s major investors include Nexus Venture Partners, Y Combinator, and General Catalyst.
This move is part of the founders’ strategy to align with India’s foreign direct investment (FDI) rules for ecommerce. These regulations prohibit foreign investment in inventory-led ecommerce models, allowing it only in marketplace formats. To operate legally as an inventory-led business, companies must qualify as Indian Owned and Controlled Companies (IOCCs), meaning they need to have more than 50% Indian ownership and control—something that could also be key for obtaining regulatory approvals and proceeding with an IPO.
On April 19, Eternal—the listed parent company of food and grocery delivery platform Zomato—informed stock exchanges that its board had approved a proposal to limit foreign ownership in the company to 49.5%. The decision is intended to give “greater operational flexibility” to its quick commerce arm Blinkit by enabling it to hold inventory, instead of functioning strictly as a marketplace, in line with India’s foreign investment regulations.
The Zepto deal “is classic promoter financing—a high-yield debt deal with embedded equity upside,” said one of the sources mentioned earlier. However, pledging promoter equity as security is an uncommon practice among Indian new-age tech startups, particularly those with significant cash burn, the people added.
Zepto received approval from the National Company Law Tribunal (NCLT) on January 9 to merge its Singapore-based parent, Kiranakart, with its Indian arm, Kiranakart Technologies, simplifying its corporate structure. Regulatory filings show that Kiranakart Technologies has since been renamed Zepto Pvt Ltd to better reflect the company’s consumer-facing brand. This restructuring is part of a broader trend of reverse flips among Indian startups preparing to access domestic capital markets.
In a separate development, Zepto is in the final stages of closing a $250-million secondary transaction involving private equity firms such as Motilal Oswal Financial Services. This secondary sale aims to boost Indian ownership and streamline the company’s cap table ahead of its planned IPO, according to a person familiar with the matter.
Currently, Palicha, Vohra, and the employee stock ownership (Esop) pool collectively hold about 28% of Zepto, according to sources. The company is targeting an additional 8-10% increase in Indian shareholding through these transactions before filing for its IPO.
This effort to boost domestic ownership comes amid growing regulatory and investor scrutiny of quick commerce firms like Zepto, particularly regarding their business models and profitability.
In a recent LinkedIn post, Palicha shared that Zepto is approaching $4 billion in annualised gross order value (GOV), with around 300% year-on-year growth and approximately 30% sequential growth since January. He also highlighted a 50% reduction in EBITDA losses (excluding Esop costs) and operating cash flow burn over the past three months, noting that the company is aiming to reach break-even on both metrics in the near future.
