Flipkart's Plans For Zepto Majority Stake Sour Over Valuation

Ecommerce major Flipkart’s negotiations with quick commerce startup Zepto for a potential stake purchase have fallen through and are unlikely to be revived.

Zepto is in talks with private equity funds, along with its existing investors, to close a fresh funding round. It is expected to hit a valuation of around $2.5 Bn on the back of the recent surge in the quick commerce sector over the past few months, ET reported.

“The companies met and Flipkart made an offer to Zepto valuing it at under $2 Bn.. but the deal didn’t go ahead. Zepto’s decision to not go ahead was centred around Flipkart wanting to pick up a majority stake in the startup..,” the report said, citing a source familiar with the matter.

Sources also said that Flipkart had expressed interest for a significant stake in Zepto while allowing the founders to continue leading the company.

“Flipkart didn’t intend to settle for a minority stake deal. This stance led to the conclusion of the discussions,” another source added.

This comes days after Zepto initiated discussions with a clutch of global investors to raise close to $300 Mn at a valuation range of $2.5-$3 Bn. Reportedly, the company is aiming for EBITDA positive by September this year.

Zepto was last valued at $1.4 Bn when it raised $200 Mn in its Series E funding round in August 2023. It also claimed the status of being the first unicorn of 2023 and ending the 11-month unicorn drought then.

As per the report, Zepto has been in discussions with private equity firms like General Atlantic, as well as sovereign funds such as the Abu Dhabi Investment Authority (ADIA) and others, exploring the investment potential.

Zepto chief executive Aadit Palicha told ET that the company is currently “not open to strategic investors,” and declined to comment on market rumours regarding external parties and investors.

“We have almost all the capital from the previous fundraise still in the bank while the company is close to EBITDA positive. With that context, in any future fundraise, we would have no intention or need to raise an amount as large as $500 Mn,” Palicha said.

According to him, any future fundraise would be primarily to prepare a balance sheet as a precursor to an initial public offer (IPO).

Besides, Zepto turned a unicorn last year and has also been growing its business significantly.

Reportedly, last month, Flipkart announced plans to venture into the quick commerce space, aiming to compete with platforms like Zepto, Zomato’s Blinkit, and Swiggy’s Instamart.

Quick commerce has surged in popularity, especially in Tier-I cities across India, in recent years. According to a 2023 Deloitte report, it has become a preferred channel for consumers, with a 51% purchase rate based on a sample size of 841. The study highlighted groceries as a particularly favored category, with 25% of consumers citing quick commerce as their top choice for grocery shopping.

However, as per an Inc42 analysis last year, customer service is among the topmost criteria for choosing any grocery delivery service, where none of the top quick commerce players could score well.

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