Zepto raises another $340 million at $5 billion valuation on boom in fast-moving commerce

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 been quick to raise some of its biggest funding rounds so far this year as it reshapes India’s e-commerce sector, forcing giants like Walmart-backed Flipkart and Tata’s BigBasket to venture into instant deliveries.

Read also | Zepto expects large orders with expansion of dark stores

According to Aadit Palicha, founder and CEO of Zepto, the new round will allow the company to strengthen its balance sheet as it prepares to deliver “solid growth and operating leverage.”

“While these recent fundings reflect great confidence in Zepto’s performance to date, we recognize that we still have a long way to go to fulfill our ambition of building a world-class Internet company in India. At Zepto, we truly feel that we are just at the beginning of our journey,” Palicha said on Friday.

The deal also marks one of General Catalysts’ first investments after Venture Highway AcquisitionThe merged entity plans to invest between $500 million and $1 billion in seed and growth investments in the country. Mint had reported in June.

Zepto, which is preparing to go public next year, had earned its coveted unicorn status a year ago when it raised $200 million at a $1.4 billion valuation.

India’s fast-track commerce market is set to grow 77% by 2023 to reach $2.8 billion in gross merchandise value (GMV), accounting for 5% of India’s overall e-commerce market, according to consultancy firm Redseer.

Read also | Zepto could overtake 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 goods sold on a platform, not including discounts and other expenses.

Palicha and Kaivalya Vohra founded Zepto in April 2021, when Covid-19 curfews had caused residents of India’s big cities to become accustomed to buying daily essentials online.

The four-year-old startup is now preparing for an initial public offering of its shares next year. Aiming for a billion-dollar listingPalicha had said Mint in June.

In recent months, Zepto, Blinkit and Swiggy’s Instamart have driven demand for instant deliveries by increasing their network of dark stores and expanding their product ranges.

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 fast-commerce business, Blinkit, the market leader, Plans to establish 2,000 by the end of 2026.

However, analysts are concerned that the potential for fast-paced commerce is limited to metropolitan cities, which is likely to hurt players in the long run.

“In the next 2-3 years, penetration in metro cities may see a plateau,” said Karan Taurani, analyst at Elara Capital. Mint, He added that the growing competition in the segment will require companies to be capital-rich and invest sufficiently in expanding into non-metropolitan cities as well as in technological capabilities.

Fast trade versus kiranas

The rapid rush to commerce has seen many players including Tata-owned Flipkart and BigBasket come in, prompting complaints from retailers that the viability of small, mom-and-pop stores is being undermined.

METROint reported earlier this week that many Kirana The owners believe that their stores have been reduced to shopping avenueswhich resulted in a drop in order volume and visits.

Last week, a national association of distributors, the All India Consumer Products Distributors Federation (AICPDF), wrote to Commerce and Industry Minister Piyush Goyal expressing concern over the popularity of flash trading.

Read more | Zepto’s advertising revenue and loyalty program accelerate growth as fast commerce grows