zepto: Ranjan Pai, Cipla family stake in Zepto; startup moves NCLT to change address

Manipal group chief Ranjan Pai’s family offices Pharmacy of humanity brothers Ramesh Juneja and Rajeev Juneja, and Cipla they are likely to join ZeptoThe fast-trading company’s funding round seeks to shore up its domestic stake with “well-known and credible” names, people familiar with the matter said.

Zepto’s parent company Kiranakart has also filed an application before the National Company Law Tribunal (NCLT) to move its holding company to India from Singapore as part of a plan to become a majority Indian-owned company in the next 12 to 18 months, they said.

NCLT Mumbai has started to hear about it.

The move comes as the rapid growth of the fast-commerce sector has put a spotlight on the operating model and ownership structures of companies and their dark stores, or mini warehouses, which are critical platforms for delivering products in less time. of 30 minutes. ET reported on September 17 on the government leveraging the same theme for e-commerce executives.

Zepto’s latest fundraising from local family offices and high net worth individuals (HNIs) for up to $150 million: first reported by ET on October 17 – It is expected to be closed at the end of this month.

Several well-known family offices with e-commerce expertise have held talks to invest in the firm backed by Silicon Valley’s General Catalyst and Nexus Venture Partners that will shift its base to Bengaluru on November 11, people aware of the talks said.

“We are raising funds to start building Indian ownership in the company and deepen our relationships with high-quality domestic investors before launching a campaign. IPO process,” said Zepto’s funding presentation, reviewed by ET.

Pai declined to comment, while emails sent to the family offices of Cipla and Mankind Pharma did not elicit any response in this regard till press time on Monday.

Zepto CEO Aadit Palicha also declined to comment.

“There are two fundamental reasons behind this round: Firstly, these family offices and HNIs will bring more confidence to mutual fund investors for pre-IPO funding as well as enhance the government’s confidence in the operational structure,” he said. one of the people mentioned above. . “It’s a process, but work has begun to significantly increase Indian participation.”

The majority of Zepto’s shareholders are foreign investors.

“A large Indian shareholding is certainly more favorable in key government circles and among policymakers, especially when there is a growing clamor about the impact of fast-track trading on Kirana and other retailers,” said another person briefed on the discussions around Zepto fundraising and aware of the events. in the sector.

While fast trading platforms have said they operate under the marketplace model, there is increasing gravitation towards an inventory model. India’s foreign direct investment rules do not allow foreign-funded online marketplaces to own inventory or control sellers on their platforms.

Read also | Zomato’s QIP salvo ahead of Swiggy’s IPO will further fuel rapid trading frenzy

Zomatoowner of Blinkit, is supposedly raising a billion dollars through a qualified institutional placement (QIP) which could also see its domestic shareholding increase following the injection of the fund.

“Based on our interactions in the industry, the acceptance rate of suppliers is around 2% of the gross order value to compensate for the execution of operations and obtain return on investments (working capital). The inventory model will also allow Blinkit to have tighter control over inventory and take calculated risks when it comes to launching or expanding new categories, as it expands well beyond supermarkets,” Jefferies said in a report published on Friday.

Diluting foreign participation still will not be easy for any of the market players.

Zepto has raised more than $1 billion in four months. It is valued at 5 billion dollars. following its $340 million fundraising on August 29.

Return

Zepto, a Y Combinator alumnus, is moving its domicile to India in connection with its initial public offering (IPO) plans, in addition to the fact that a fully domiciled local company can also benefit from its optics in terms of creating employment and driving e-commerce growth here. ET had reported in January saying Zepto is among the foreign-domiciled startups looking to merge their Indian and foreign units to completely shift the parent company to India.

Zepto is working with Deloitte on the migration. “It should close in about six months,” said a person familiar with Zepto’s move.

Groww, another Y Combinator alum, closed its migration to India on Monday. saying he paid 1.34 billion rupees in taxes for the change. ET has been reporting on the tax expenditure of Indian startups looking to relocate here. These include Meesho, Razorpay, Eruditus, Kreditbee, Udaan and others.

Red Hot Fast Trading

Meanwhile, Zepto continues to step on the expansion accelerator at a time when Blinkit and Swiggy Instamart is also doubling down in their existing markets, as well as entering new cities. Flipkart Minutes is among the latter participants expand while BigBasket is another rival besides JioMart piloting the serviceagain.

Zepto has already surpassed 500 dark stores, people familiar with the expansion numbers said. flashes and drink Instamart had 639 and 557 dark stores, respectively, in the June quarter.

“September was the most aggressive month in terms of expansion and spending,” one of the sources said.

“Including monthly spend and cash capital spend, they have reached (read: spent) more than $20 million in September,” another person said, underscoring the capital-intensive nature of the industry.

This is one of the factors why Zepto’s annualized gross sales soared to $2 billion, up from $1.5 billion in May.

“We now have over $1 billion in net cash in the bank,” Zepto told a group of investors as part of the recent fundraising. Motilal Oswal Asset Management Company has already committed around $40 million in this round, sources said.

“As of FY24, cash and investments on the balance sheet of Zomato and Swiggy stand at $1.5 billion and $735 million, respectively,” an Elara Securities note said, adding that back-to-back fundraising from Zepto has potentially taken its cash balance to $1.23 billion.

According to a recent report from Bofa Securities, the fast trading market is expected to reach $22 billion by 2027, from just under $3 billion in 2023, while a Citi report on September 10 said that Fast commerce remained the fastest growing online category, with Blinkit and Zepto maintaining high growth. rates.