Why Zepto is planning $250M secondary sale prior to IPO
What's the story
Zepto, a leading player in the quick commerce space, is said to be in talks for a secondary sale of up to $250 million.
The deal involves its existing shareholders and seeks to boost the stake of Indian investors ahead of the company's anticipated initial public offering (IPO) later this year or early 2026.
The talks revolve around investment arms of Motilal Oswal Financial Services Ltd., and Edelweiss Financial Services Ltd. buying shares in this secondary sale.
Sale details
No additional capital to be raised
The proposed secondary sale will not see Zepto raising any additional capital. Rather, it will give employees and some existing investors a chance to convert their shares into cash.
The company expects to close these transactions at a valuation of just over $5 billion, in line with its last funding round held late last year.
Ownership increase
Zepto's strategy to boost Indian investor ownership
The secondary sale comes as part of Zepto's larger plan to increase Indian investor ownership ahead of its IPO.
Currently, Indian shareholders own nearly 33% of Zepto's cap table. The company's founders Aadit Palicha and Kaivalya Vohra own nearly a fifth of the firm.
The goal is to increase the overall stake of Indian investors to around 50%.
Staff motivation
Secondary stock sales: Controversial yet rewarding
Historically, secondary stock sales have been controversial as they can allow managers/employees to cash in before an IPO/sale, reducing their motivation to build the business.
However, they have recently emerged as a way to reward staff and boost morale while allowing investors to realize profits from their investments.
Zepto operates in India's highly competitive grocery delivery sector, competing against Amazon's India unit and homegrown rivals Swiggy, Zomato, and BigBasket.