Rafomac News, Tech & Trends That MatterZepto is gearing up for an IPO with a staggering valuation between $7 and $10 billion. But here’s the catch: even in its best quarter, the company lost 59 rupees on every single order. How did a firm burning nearly 6,000 crores in losses convince investors it’s worth billions? The answer lies deep in the numbers.
Why is Zepto burning cash at such a scale?
Zepto promises to deliver groceries in 10 minutes, a claim that has helped it rocket to an astonishing $7–10 billion IPO valuation despite a financial reality that’s far less rosy. This four-year-old startup reported losses nearing 5,950 crores last financial year, and even at peak performance, it lost 59 rupees on every order placed. Essentially, Zepto is paying you to shop.
Comparisons with peers deepen the intrigue. While Blinkit recorded an average order value (AOV) of 525 rupees and Instamart 504 rupees, Zepto lags at just 388 rupees per order. This smaller basket size eats into any economies of scale Zepto might achieve.
How does Zepto’s revenue actually work?
Unlike marketplaces like Swiggy that earn commissions by connecting buyers and sellers, Zepto operates as a retailer. The revenue figures they report—totaling around 24,815 crores—represent the gross value of goods sold. But Zepto only pockets about 18.56% of this amount, roughly 72 rupees per order, coming from product margins, delivery and handling fees, plus advertising income from brands looking to promote their goods on Zepto’s platform.
On the cost side, there are two major buckets: fixed and variable costs. Fixed costs include rent and salaries tied to their ‘dark stores,’ warehouse-like setups that don’t fluctuate with order volume. Variable costs cover expenses directly tied to each order—rider pay, packaging, last-mile delivery—and run about 64 rupees per order. Adding a thin marketing spend of around 4 rupees per order, the total cost hits approximately 151 rupees per order.
Is there a realistic path from losing 79 rupees per order to making a profit?
Zepto is trying to close this gap by pulling three levers. The most promising is the growth of advertising revenue, which jumped from 49 crores in FY24 to over 1,600 crores in FY26. Advertising margins are high—estimates suggest over 90%—making it close to free money for Zepto. Ads contribute about 26 rupees per order, and the hope is to crank this number up to roughly 85 rupees per order to significantly offset losses.
But this is where the math gets tricky. For ads alone to cover the remaining losses, 22% of an order’s value would need to come from advertising revenue—a figure no retail platform worldwide approaches. Because brands themselves operate on razor-thin margins—often making only 5 to 10 rupees profit per product after costs—there’s a hard ceiling on how much Zepto can squeeze through ads and trade margins before pushing suppliers to the brink.
Can Zepto cut costs enough to turn profitable?
The variable cost side, including packer and rider pay, has barely shifted—hovering around 61 rupees per order. Discounts have been slashed to minimal levels, and digital marketing costs dropped dramatically from 34 rupees to under 5 per order within a year. Beyond that, there’s little left to trim without jeopardizing quality and service.
Fixed costs per order have come down from nearly 88 rupees to about 52 rupees as order volume has doubled, but these gains plateau around 2,500 orders per dark store per day—roughly where Zepto currently operates. So, while costs can reduce slightly more, the majority of the 59-rupee loss gap remains stubbornly intact.
Why does average order value hold the key?
The most crucial unlocking factor lies in boosting the average order value. Zepto’s 361 rupees per order (when calculated honestly across quarters) is their Achilles’ heel. A higher order value dilutes fixed and variable costs, which remain largely unchanged per trip regardless of basket size. For example, a 115-rupee cost per order is 32% of a 361-rupee basket but only 21% of a 550-rupee basket.
Blinkit enjoys both a high order volume and a hefty order value, making it closer to profitability, while Instamart’s smaller store throughput limits fixed cost efficiency despite a better AOV. Zepto’s strategy hinges on nudging the average order value above the 550-rupee mark—whether by introducing higher-value products or encouraging more items per order. Achieving this could turn Zepto’s current cash-burning machine into a money-making one.
Should retail investors jump into Zepto’s IPO?
Zepto’s story is a complicated one—a mix of bold growth, serious cash burn, and ambitious plans to unlock profitability via advertising and higher order values. Whether this will materialize is a guess right now. For investors, the best defense is diligent homework—reading the detailed IPO filing, questioning assumptions, and consulting financial experts.
Zepto’s approach echoes Amazon’s early playbook: build a massive, engaged customer base with thin margins, and then monetize the ecosystem with valuable ancillary businesses. If that path succeeds, Zepto could become a formidable platform. But if it doesn’t, the IPO could simply be a polite exit route for early financial backers.
