Zepto Founders in talks with Edelweiss and others to Raise ₹1,500 Crore in Structured Debt Ahead of IPO

In a strategic move to bolster Indian ownership ahead of its public market debut, Zepto founders Aadit Palicha and Kaivalya Vohra are in advanced talks to raise about ₹1,500 crore ($180 million) through a structured debt facility anchored by Edelweiss Alternative Asset Advisors.

The fresh capital, structured with a minimum yield of 16% and an equity upside pushing returns closer to 18%, will primarily be used to buy out shares from foreign investors. 

The transaction, with a three-year tenure, is expected to close by July. Edelweiss has submitted a binding term sheet and will underwrite nearly half the funding, while the rest will be syndicated to domestic family offices and smaller credit funds, the people said.

“This is a classic promoter financing deal — high-yield debt backed by a pledge of promoter equity, with a rare equity-linked upside baked in,” a person involved in the negotiations said.

The Zepto founders currently hold around 18% of the company. With this transaction, their stake is expected to rise to about 20%, while total domestic ownership could cross 30%, setting the stage for a cleaner IPO process.

The urgency to consolidate Indian ownership stems from regulatory requirements. India's FDI rules permit 100% foreign ownership in marketplace models but prohibit it in inventory-led e-commerce operations — the model Zepto follows.

For such companies, being classified as an Indian Owned and Controlled Company (IOCC) — defined as having more than 50% Indian ownership and management — is crucial for regulatory compliance and for listing eligibility on Indian stock exchanges.

"Boosting Indian shareholding is no longer optional for companies like Zepto if they want to avoid regulatory hurdles post-listing," a senior corporate lawyer tracking the matter said.

Notably, the use of structured debt for promoter financing remains uncommon among India's high-growth tech startups, where cash burn and volatile valuations usually deter traditional lenders.

Alongside the debt raise, Zepto is working to close a $250-million secondary share sale, reported first by Bloomberg, which will see participation from private equity firms such as Motilal Oswal Financial Services. The secondary deal is designed to further clean up Zepto’s cap table and increase Indian institutional ownership ahead of the IPO filing, another person familiar with the matter said.

Currently, Palicha, Vohra, and Zepto's employee stock ownership pool collectively hold about 28% in the company. Post these transactions, the company aims to add another 8-10% of Indian ownership.

Zepto counts marquee investors such as Nexus Venture Partners, Y Combinator, and General Catalyst among its largest backers.

The financing effort comes on the heels of a major restructuring at Zepto. In January, the company secured National Company Law Tribunal (NCLT) approval to merge its Singapore-based parent, Kiranakart, with its Indian arm, Kiranakart Technologies. It has since rebranded to Zepto Pvt Ltd, aligning its corporate identity with its consumer-facing brand.

Zepto is among a growing cohort of Indian startups — including Flipkart’s Myntra and PhonePe — undertaking “reverse flips” back to India, to unlock access to domestic capital markets and tap into increasingly deep pools of Indian institutional money.

The ownership clean-up comes at a crucial time for Zepto and the quick-commerce sector, where questions around profitability and scalability have intensified.

In a recent LinkedIn post, Palicha said Zepto had crossed $4 billion in annualised gross order value (GOV), growing 300% year-on-year. He also pointed to a 50% reduction in EBITDA losses (excluding ESOP costs) and a steady decline in operating cash burn over the past three months. The company is targeting EBITDA break-even and positive operating cash flows in the near term.

While competitors jostle for market share, Zepto's dual-track strategy — strengthening governance and ownership structures while tightening operational efficiencies — could offer it an edge as it gears up to tap public investors.