While this would intensify competition between Zepto, Blinkit and Swiggy’s Instamart, it is also expected to result in closer scrutiny of the sector, given its high cash burn and aggressive expansion plans, mutual fund analysts and industry executives said.
“Once Zepto lists, all the three big players will be public and the tolerance for opaque economics will drop meaningfully,” a Mumbai-based equity research analyst at a large domestic brokerage firm said. “Investors are likely to focus on growth since there’s a substantial headroom in this sector but, at the same time, store-level profitability, payback periods on dark stores, and how much incremental demand is being bought through discounts will also be important,” he said.
“With three players expanding in the same micro-markets, the bigger question is whether competitive intensity will ease fast enough, or whether profitability timelines keep getting pushed out despite scale,” he added.
The four-year old Zepto will become the youngest new-age venture capital-backed company to go public. It has so far closed private funding rounds of more than $2 billion across primary and secondary transactions, including a $450-million round closed in October, of which around $300 million was in primary capital.
Over the past year, Swiggy has raised about Rs 14,500 crore from public market investors, first through its November 2024 IPO, followed by a top-up from this year’s qualified institutional placement (QIP).
Blinkit parent Eternal, meanwhile, raised Rs 8,500 crore through a QIP in 2024.
While Zepto’s October round closed at a $7-billion valuation (around Rs 62,000 crore), Eternal’s latest market capitalisation is Rs 2.7 lakh crore and Swiggy’s is Rs 1.1 lakh crore.
Through its IPO, Zepto is looking to raise up to another Rs 11,000 crore to add to its war chest at a time when deep-pocketed ecommerce rivals such as Flipkart and Amazon are also stepping up their 10-minute delivery plays.
Bernstein analysts estimate that the quick-commerce market will be $35 billion in size by 2030.
Analysts said market share dynamics, which have been a point of contention between the players in the past, are expected to become clearer with Zepto’s post-listing public disclosures.
While Blinkit is a leader in the space with more than half the market share, according to BofA Research, Zepto and Instamart have been tussling for the second spot.
“From a public markets lens, market share matters as much as absolute growth… When three lossmaking companies are chasing the same customer with similar economics, even small changes in market share can act as a deciding factor on capital allocation,” an analyst with a mutual fund house said. “For a category where competition is intense, there is only so much patient capital available in the public markets.”
In a December interview with ET, Blinkit chief executive Albinder Dhindsa said the public markets’ appetite to fund quick-commerce expansion through balance sheet capital is limited, adding that the sector will soon face questions around sustainable growth.
While platforms expanded their network with new dark stores and achieved store-level profitability in some pockets, this growth is expected to come at the cost of cash burn.
Currently, while Blinkit has more than 1,800 dark stores on its network, Zepto and Instamart have 1,100-1,200 dark stores each. Flipkart’s quick commerce unit Minutes is adding stores to get to the 800-mark, while Amazon’s service Now has around 300 stores.
“Next year is going to be more competitive and Zepto’s cash burn could increase even after listing,” said Satish Meena, founder of ecommerce consultancy firm Datum Intelligence. “The platforms will have to burn money to acquire customers from other players. They will also have to put money to experiment with different models in quick commerce,” he said.
“For now, these companies have enough cash to gain investor interest,” Meena said. “These companies will have to show that they are gaining market share to hold the investor confidence.”
