Zepto

The Setup :

Zepto is preparing to list on Dalal Street. Morgan Stanley and Goldman Sachs are the lead bankers. The IPO valuation has already been cut 15-20% from the original $7-8 billion estimated target to an expected $5.6-5.95 billion. The bankers are pricing it.

I decided to value it.

Before I get to the numbers, I want to say something that applies whether you're reading this as a founder of a two-year-old D2C brand or as someone tracking the Zepto IPO: the laws of valuation are identical regardless of stage or listing status. The methodology I applied to Zepto is the same methodology I apply to a pre-seed startup. What changes is the story, the growth path, the risk, the moment in the company's life. The framework stays constant. This page exists to show that.

Now, the more important thing to understand before the numbers.

An IPO price is not a valuation. It is pricing. Bankers are paid a percentage of the capital raised. The higher the listing price, the higher their fee. Their job is to find the highest price the market will bear at the moment of listing, not to find the number the business is intrinsically worth. These are structurally different exercises with structurally different incentives. When a banker tells you a company is worth $7 billion, they mean the market will pay $7 billion today. That is useful information. It is not the same as what the business will generate in cash over its lifetime, discounted back to today.

The gap between those two numbers in Zepto's case, enormous - is what this analysis is about.

What Zepto actually is and how i built the revenue :

Most people think Zepto is a grocery delivery company. It isn't or at least it won't be for long.

Groceries are the reason you open the app. But every time you search "face wash" or "chips" and one brand appears first that's an advertisement. A brand paid for that placement. Zepto collected the fee. The most important number in this entire analysis is the distinction between Zepto's gross order value and its actual operating revenue. FY25 GOV was ₹9,660 crore. Actual operating revenue what they keep after product costs is approximately 15-18% of that. Roughly ₹1,700-1,800 crore. Most retail investors looking at the IPO will see ₹9,660 crore and think they are buying a ₹9,660 crore revenue business. They aren't.

I built the valuation around two channels.

Platform Revenue : GOV for FY26 is approximately ₹11,110 crore. Take rate starts at 15% and improves to 22% by Year 10 as Zepto gains pricing power over merchants. Base year platform revenue: approximately ₹1,666 crore, growing to ₹21,102 crore by Year 10. The GOV growth story is an India story: $57 billion quick commerce TAM by 2030, UPI making digital payments frictionless, per capita income rising, and a consumer behavior reordering toothpaste in 10 minutes that once adopted is almost never reversed.

Advertising Revenue : this is the hidden business model that nobody discusses enough. When enough consumers are buying a category on one platform, brands have no choice but to advertise there. Blinkit already generates 15% of its revenue from advertising. DoorDash in the US went from near-zero advertising to 8%+ of GMV within five years of its IPO and that advertising revenue is what ultimately made them profitable. I modelled Zepto's advertising starting at 8% of platform revenue in FY26 approximately ₹133 crore growing to 20% by Year 10, reaching ₹4,220 crore. More brands selling on Zepto means more competition for placement. More competition means higher advertising rates. Higher advertising rates means this channel grows faster than underlying order volume. The same mathematical logic that made Google and Meta the most profitable businesses in history.

Total revenue: ₹1,799 crore in FY26. ₹26,634 crore by terminal year.

Margins start at negative 184% EBIT for every ₹1 of operating revenue, Zepto spends ₹2.84. But look at the comparable: Blinkit was deeply loss-making two years ago and is now EBITDA positive. The mechanism is documented as order density per dark store increases, fixed costs spread across more orders. As advertising revenue grows, it flows almost entirely to the bottom line because it has near-zero marginal cost. I modelled Zepto turning EBIT positive by 2030 and reaching 18% EBIT margin at terminal year — above retail sector average of 8-10%, justified by the advertising layer which commands premium margins unlike pure grocery retail.

Cost of capital starts at 25% - reflecting pre-IPO risk, ongoing losses, competitive uncertainty. The IPO reduces this immediately to 20% in Year 1, stepping down to the sector average of 8.39% by terminal year. This mirrors exactly what happened to Zomato and Swiggy after their respective listings.

The Numbers and what the Gap Means :

Value of Equity: ₹12,528 crore.

The IPO is being priced at approximately ₹46,000-50,000 crore.

That gap roughly 3.5-4x is not irrational. Investors are paying for the option value of Zepto becoming India's dominant advertising platform for consumer brands. They're paying for the possibility that quick commerce penetration reaches Chinese levels where 25% of consumers use it regularly versus India's current 4%. They're paying for the strategic premium of owning the infrastructure of India's digital-physical commerce layer.

My DCF says the business as it currently operates and grows is worth ₹12,528 crore. The rest depends on execution, market expansion, and monetization that may or may not materialize. Both numbers are legitimate. They answer different questions.

Now and this is the part I want every founder reading this to sit with.

If you're selling on Zepto today, you are not just a seller. You are a potential advertiser. The platform that delivers your product is also the platform that will increasingly charge you to be visible on it. Your distribution cost and your advertising cost are converging into one platform fee. The founders who understand this early, who build brands strong enough that consumers search for them by name rather than by category are the ones who won't be held hostage by Zepto's advertising rates in five years.

That's not a Zepto problem. That's the structural reality of any platform that achieves dominance. Google did it to websites. Amazon did it to sellers. Zepto is doing it to D2C brands.

Know your economics before the platform knows them better than you do.