What Risks Does Zepto Face Ahead of Its IPO? Key Insights Revealed!
Zepto's IPO: Navigating Challenges and Risks
New Delhi: The quick commerce unicorn Zepto is facing a series of significant challenges as it prepares for its initial public offering (IPO). Key risk factors include a history of substantial operating losses, recent summons from the Enforcement Directorate directed at its founders, and increased regulatory scrutiny regarding consumer protection.
In its recently updated Draft Red Herring Prospectus, filed on Monday, the Bengaluru-based company revealed that it has reported losses every fiscal year since its establishment in July 2021. It cautioned that negative cash flows may persist as it continues to expand its operations.
Zepto stated, "We may continue to incur losses and negative cash flows from operating activities as we invest in expanding our user base and technology infrastructure, adding new product categories to our platform, expanding our private labels, enhancing our supply chain operations, increasing the number of dark stores, and improving our brand visibility, among other initiatives."
The company further noted that its revenue growth could be hindered by declining demand, a limited range of product categories that fail to meet customer needs, and insufficient growth in platform participants due to rising competition and escalating regulatory costs.
According to the document, Zepto's net loss increased to Rs 5,905.19 crore for the fiscal year 2025-26, compared to a loss of Rs 4,699.71 crore in the previous year. However, its revenue from operations more than doubled, reaching Rs 22,623.58 crore in FY26, up from Rs 11,109.94 crore in FY25.
For the quarter ending March 31, 2026, Zepto managed to reduce its net loss to Rs 1,538.67 crore, down from Rs 1,831.91 crore in Q4 FY25. Quarterly revenue surged by 75.26% to Rs 7,497.64 crore, compared to Rs 4,278.06 crore in the same period last year.
A notable legal concern highlighted in the documents involves summons issued by the Directorate of Enforcement to promoters Aadit Palicha and Kaivalya Vohra on April 8, 2026. The founders were instructed to provide documents and information related to foreign investments, shareholding structures, and their business model.
Zepto mentioned, "As of the date of this Updated Draft Red Herring Prospectus-I, we have not received any further communication from the ED since submitting our response. However, we cannot guarantee that there will not be future inquiries or that these could escalate into investigations, legal actions, or potential penalties."
The company also outlined ongoing issues with the Central Consumer Protection Authority regarding allegations of using 'dark patterns'—deceptive design practices—on its platform, including basket sneaking, misleading advertisements, and drip pricing.
The regulator has imposed a penalty of Rs 7 lakh for non-compliance with guidelines against dark patterns, an order that Zepto is currently appealing before the National Consumer Disputes Redressal Commission.
An interim stay has been granted in this matter, but Zepto warned that any unfavorable outcomes or changes in legal interpretations could adversely affect its operations and business outlook.
Operational dependencies are a critical aspect of Zepto's risk profile, with the company emphasizing that its delivery model relies heavily on the location, size, and density of its dark store network.
Zepto stated, "Our inability to manage and expand our dark store network efficiently could negatively impact our business, financial health, cash flows, and operational results."
Currently, Zepto operates a total of 1,139 dark stores, an increase from 1,029 in 2025 and 337 in 2024.