Zepto unlikely to turn profitable in near term
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Zepto unlikely to turn profitable in near term

By Priyal Mahtta

  • 22 Nov 2022
Zepto unlikely to turn profitable in near term
Aadit Palicha, CEO and Co-founder of Zepto

Quick commerce platform Zepto does not expect to turn profitable in the near term, but is looking to turn cash flow positive in the medium term, co-founder and chief operating officer Aadit Palicha said.

Zepto, operated by Kiranakart Technologies Pvt. Ltd, reported a net loss of ₹390.4 crore in FY22 on a standalone basis, according to its annual filing with the Ministry of Corporate Affairs.

“Profitability is a function of how many new markets you want to launch into. Every time you launch a new market, that market starts off as unprofitable,” Palicha said in an interview.

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Founded by Stanford University dropouts Palicha and Kaivalya Vohra, Zepto was last valued at about $900 million. It operates a network of  ‘cloud stores’ or micro-warehouses to deliver groceries and essentials within minutes. The startup, slightly more than a year old, operates in India’s nascent quick commerce market, competing with the likes of Swiggy’s Instamart and Zomato’s Blinkit.

In FY22, the Mumbai-headquartered startup clocked an operating revenue of ₹140.7 crore in its first complete year of business. Of this, about ₹121.3 crore was from grocery sales. While grocery sales contributed about 86% of revenue, it earned ₹19.4 crore from the sale of services in FY22.

“Today, we are doing 2x revenue every single month compared to the entirety of FY22,” Palicha said. “From April 2022 to November 2022, the business has (grown) 2.7x (compared to the same duration last year). In FY23, we should be well over 20x the revenue that compared to FY22.”

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Zepto incurred total expenses of about ₹532.7 crore during the year. However, Palicha claimed these costs are improving now. “Our expenses as a percentage of sales is much lower, almost 10x lower than FY22,” he said, adding, “We are doing much better unit economics because now we have achieved scale, and we are able to unlock operating leverage from the scale.” The company said its cost of customer acquisition has reduced to about a twelfth of what it was in November 2021. Zepto has so far raised about $360 million in funding since its inception. A soonicorn, it had last raised $200 million in a Series D round led by American technology startup accelerator Y Combinator’s Continuity Fund.

The startup is also backed by Kaiser Permanente, Nexus Venture Partners, Glade Brook Capital, and Lachy Groom.
“We have a capital runway to early-mid 2025,” Palicha said.

While geographical expansion is on the cards, Zepto is currently focusing on going deeper and scaling business in the cities it is already operational in. The quick commerce platform may, however, expand to tier II/III cities in the next 2-3 quarters, he said.

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Currently, Zepto is functional in cities including Bengaluru, Delhi, Gurgaon, Chennai, Hyderabad and Pune. It has set up offices in all major cities, with its corporate headquarters in Mumbai and engineering/product office in Bengaluru and has a team of about 1,300 people.

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