Why Zepto wants a ₹1,500cr loan ahead of IPO
What's the story
Zepto co-founders Aadit Palicha and Kaivalya Vohra are in advanced stages of raising around ₹1,500 crore via structured debt, the Economic Times has reported.
The main aim is to increase Indian ownership ahead of the company's expected initial public offering (IPO).
Edelweiss Alternative Asset is leading the deal with domestic family offices and smaller credit funds.
Ownership boost
Deal aims to increase domestic ownership
The structured debt deal is aimed at buying out shares from current foreign investors, thus bringing domestic ownership together for the quick commerce start-up.
The move comes ahead of Zepto's planned IPO.
The three-year tenure transaction, which is expected to be completed by July, values Zepto at nearly $5 billion—the same valuation at which it raised equity financing last year.
The loan has a minimum interest rate of 16%.
Regulatory compliance
Deal to comply with FDI regulations
The founders' move is to comply with FDI regulations governing online retail and to meet the Indian ownership threshold. This is essential for regulatory approvals and IPO eligibility.
India's FDI rules permit 100% foreign investment in online marketplace models but not in inventory-led e-commerce.
They require over 50% Indian ownership and control to be classified as an Indian Owned and Controlled Company (IOCC).
Secondary transaction
Zepto plans secondary transaction to increase Indian ownership
Along with the structured debt deal, Zepto is also closing a $250 million secondary transaction with private equity firms such as Motilal Oswal Financial Services.
This secondary sale will further enhance Indian ownership and simplify the firm's capital table ahead of its public listing.
Currently, Palicha, Vohra, and the employee stock ownership (Esop) pool own about 28% of Zepto. The company plans to raise this by another 8-10% through these transactions before filing for its IPO.