Zepto’s Bold Bet: 16% Yield Private Credit Deal Sparks IPO Buzz with 3 Powerful Moves

Indian quick-commerce startup Zepto is raising ₹1,500 crore ($176 million) through a private credit deal offering investors a 16% yield—a bold move to buy back shares from foreign investors and increase domestic ownership ahead of its planned IPO. The rupee-denominated bonds, split between institutional investors like EAAA India Alternatives and wealthy individuals, highlight the growing reliance on high-cost debt in India’s cash-intensive quick-commerce sector.

By shifting ownership locally, Zepto aligns with regulatory expectations and investor preferences, mirroring trends seen in recent IPOs of Indian startups. However, the steep 16% yield underscores risks: the company operates in a fiercely competitive, low-margin industry where profitability remains elusive. This deal reflects Zepto’s urgency to scale infrastructure and strengthen its market position while navigating pre-IPO challenges. Success hinges on executing its public listing smoothly, as delays could strain debt repayments.

For investors, the offer is a high-stakes bet on India’s booming quick-commerce potential—and Zepto’s ability to deliver. 

Zepto’s Bold Bet: 16% Yield Private Credit Deal Sparks IPO Buzz with 3 Powerful Moves

India’s rapid grocery delivery sector is heating up, and Zepto, one of its key players, is making strategic financial moves to position itself for a successful initial public offering (IPO). The Mumbai-based startup plans to raise ₹1,500 crore ($176 million) through a private credit deal offering investors an eye-catching 16% yield—a signal of both ambition and the risks inherent in India’s hyper-competitive quick-commerce space.  

Domestic Ownership: A Strategic Play for IPO Success 

The capital raised will be used to buy back shares from foreign investors, boosting domestic ownership—a critical step as Zepto eyes a public listing. India’s regulatory environment often incentivizes local control in sectors like retail, where foreign investment rules can be stringent. By increasing domestic stakes, Zepto may aim to align with potential IPO requirements, enhance governance credibility, or appeal to local market sentiment.  

This shift mirrors a broader trend among Indian startups preparing for IPOs. Companies like Paytm and Zomato have similarly adjusted ownership structures to meet regulatory expectations and investor preferences for balanced domestic-international stakeholder ratios.  

The 16% Yield: High Reward, But What’s the Risk? 

The 16% yield on Zepto’s rupee-denominated bonds is nearly triple the return on India’s 10-year government bonds (currently ~7%). Such a high rate underscores the perceived risk associated with the deal. Private credit often fills gaps left by traditional lenders, but it comes at a cost—especially for startups in cash-intensive sectors like quick commerce, where profitability remains elusive.  

Experts suggest the yield reflects Zepto’s urgency to secure capital amid fierce competition. Rivals like Blinkit (owned by Zomato) and Swiggy Instamart are scaling rapidly, and delaying funding could mean losing market share. For investors, the deal offers a lucrative short-to-medium-term return, but it also ties them to Zepto’s ability to execute its IPO plans smoothly.  

The Private Credit Surge in India’s Startup Ecosystem 

Zepto’s deal highlights the growing role of private credit in India’s startup financing landscape. With banks often hesitant to lend to high-growth, loss-making ventures, alternative lenders—including funds like EAAA India Alternatives (backing 50% of this deal)—are stepping in. The sector has seen a 35% YoY increase in private credit transactions, reaching $13 billion in 2024, per industry reports.  

This trend is particularly pronounced in IPO-bound firms seeking to optimize their cap tables without diluting equity. For instance, PharmEasy and Byju’s have previously leveraged structured debt to navigate pre-IPO challenges.  

The Quick Commerce Battle: Why Zepto’s Timing Matters 

Zepto operates in India’s $5 billion quick-commerce market, projected to grow 10x by 2030. The sector, however, is a cash burn arena, with players racing to perfect the “10-minute delivery” model while grappling with thin margins. Analysts note that Zepto’s focus on dark stores (small, localized warehouses) and a lean operating model has helped it carve a niche, but profitability remains a distant goal.  

By securing capital now, Zepto aims to expand its infrastructure and tech stack ahead of its IPO—a crucial step to convince public investors of its long-term viability.  

What’s Next for Zepto and Investors? 

If the deal closes by June 2025 as planned, Zepto will join a growing list of Indian startups using creative financing to bridge the pre-IPO gap. However, questions linger:  

• Can Zepto sustain growth without further diluting equity?  

• Will domestic ownership truly enhance its IPO valuation?  

• How will the company manage debt repayments if IPO timelines slip? 

For the market, Zepto’s journey offers a case study in balancing growth, regulatory alignment, and investor expectations. For now, the 16% yield is a high-stakes bet on India’s booming quick-commerce potential—and Zepto’s ability to deliver.