Can Zepto’s Revenue Engine Outrun Quick Commerce Costs?

In 2021, when much of India was still getting used to ordering groceries online, two teenage Stanford dropouts, Aadit Palicha and Kaivalya Vohra, entered the market with a proposition that sounded excessive even by startup standards: groceries and essentials delivered by Zepto in 10 minutes.

Many questioned whether Zepto even understood India’s ecommerce market and the capital-intensive nature of setting up such a 10-minute delivery app. But now more than five years later, the bet seems almost prescient.

In those five years, everything has changed. The likes of Eternal and Swiggy listed publicly, and scaled their quick commerce apps Blinkit and Instamart. BigBasket, Flipkart, Amazon and Jio are all trying to get a piece of the quick commerce pie, but Zepto remains the only one which was quick commerce native from day one.

Now on the verge of an IPO, it’s worth examining how the company’s business model has evolved. Its updated draft red herring prospectus released in June 2026 outlines a fresh issue of up to ₹8,010 Cr, along with an offer for sale of as many as 11.35 Cr shares.

If the listing goes through, Zepto could become India’s first pure-play quick commerce company to list on the stock exchanges. And as such it’s pertinent to understand how the company earns its money.

It’s even more imperative now because public market investors will look beyond growth, even though Zepto has plenty of that to show.

In FY26, the company generated ₹22,623.58 Cr in operating revenue and ₹504.79 Cr in other income, against ₹29,026.75 Cr in expenditure. After exceptional items, the net loss was ₹5,905.19 Cr.

The gap became more evident as Blinkit reported an adjusted EBITDA profit of ₹37 Cr in the March quarter of FY26 — a single quarter, measured on adjusted EBITDA, against Zepto’s full year.

Given this, the question public-market investors will ask: how much of Zepto’s growth is being financed through discounts and spending that may have to continue after listing?

Zepto has long argued that expansion, rather than mature stores, explains much of the company’s losses. “As long as our mature stores continue to turn profitable and we are only losing money due to store launches, that is a good place to be,” Palicha said in an earlier interview.

Still, processing an order more efficiently is only one part of the business. The larger question is where the money for that order comes from.

Why Zepto Restructured Before The IPO

Zepto began as KiranaKart in late 2020 as a B2B supply chain startup targeting smaller retailers. Scaling this up was not easy in an environment where such retailers and kirana stores were not willing to pay the margins for supply chain tech.

So in 2021, the founders pivoted to a B2C app and bet on 10-minute deliveries under the brand name Zepto. This seemed like an easier sell for investors and Zepto quickly raised funds to scale up and launch dark stores.

Palicha had made the case before Zepto even launched: “We are definitely going the dark store route. It’s the only way to make money in this space long term,” he said in January 2021.

Under that early model, which carried on till January 2025, the company sold products through three retail companies — Geddit Convenience, Commodum Groceries and Drogheria Sellers. Kiranakart acted as the wholesaler, while these retailers fulfilled the transaction through the Zepto app and paid a licence fee for the same. This generated ₹1.34 Cr in licence fees or IP revenue in FY25.

That split — one company buying the stock, separate companies selling it — was necessitated by India’s FDI policy for multi-brand retail, which barred inventory-led ecommerce ops while marketplace structures were permissible even under FDI.

At the time, Singapore-based Kiranakart Pte Ltd was the holding company, while Kiranakart Technologies ran the Indian business.

Ahead of its planned IPO, Zepto began reorganising. In October 2024, the company incorporated Zepto Marketplace Pvt Ltd (ZMPL) and in January 2025, the holding company redomiciled to India and merged into Kiranakart Technologies.

In April 2025, Kiranakart Technologies Pvt Ltd was renamed Zepto Private Limited which was converted into a public company by December of that year and renamed to Zepto Limited, which is now aiming to list.

The formation of ZMPL is the step that matters most to track Zepto’s growth since then. This was the beginning of a shift to a marketplace model, under which merchant partners used the platform to sell products for a pre-agreed commission.

Separately, Zepto still sources products from brands and sells them on to wholesalers and retailers on a non-exclusive basis, a supply-chain business it describes apart from the platform. Here’s what the model looks like right now:

Inside Zepto’s Biggest Revenue Stream

Now that we understand the entities running Zepto, let us follow the money moving between them. In the past three years, Zepto has added several revenue engines to its core business.

Alongside the sale of traded goods, the filing breaks revenue from services into six lines: warehousing, packaging and last-mile charges; platform services; advertising; subscription fees; franchisee fees; and licence charges (nil since FY26).

The largest of these is the sale of traded goods. This is the revenue Zepto generates by procuring products and selling them through its platform. It rose 4.5X from ₹3,905.19 Cr in FY24 to ₹17,587.92 Cr in FY26, accounting for 77.7% of operating revenue in the latest year.

Sale of services brings in the next big chunk. The same inventory supports a second revenue layer built around the services required to sell and deliver it. In FY26, Zepto generated ₹5,022.52 Cr from services, over nine times the ₹547.61 Cr recorded in FY24. These services accounted for 22.2% of operating revenue in FY26, up from 12.3% two years earlier.

The largest part came from warehousing, packaging and last-mile services. Brands paid Zepto ₹2,779.84 Cr to store products, process orders and move them to customers.

Advertising was the next-largest contributor at ₹1,635.73 Cr, or 7.2% of operating revenue. Zepto had been consciously scaling this business before disclosing its FY26 numbers.

Brands pay Zepto to promote their products through sponsored listings, search placements and other advertising inventory on the platform. The value of this business grows with the number of consumers browsing the app and the volume of products competing for their attention.

Zepto spent ₹1,389.12 Cr advertising itself in FY26 against the ₹1,635.73 Cr it earned selling advertising to brands — a net contribution of about ₹247 Cr. The business is growing fast, and the company is explicit that it is the lever holding margins steady.

In the UDRHP, Zepto says it has kept gross profit range-bound by offsetting cuts in commissions with advertising growth. But it is not yet earning more than it spends by a wide margin.

Platform services contributed another ₹564.17 Cr. This is the income Zepto earns from brands for using its marketplace and related technology. It is also where the old licence model has ended up, following the shift to a marketplace in January 2025.

The remaining streams are small; together, they accounted for less than 0.2% of operating revenue. Subscription fees brought in ₹28.31 Cr in FY26 and franchisee fees ₹14.46 Cr. Set against ₹294.13 Cr of store and franchisee expenses in the same year, the growth-partner model is at present a cost line rather than a revenue one.

These revenue streams explain how Zepto can earn more from an order than the margin on the products alone.

The Cost Of Quick Deliveries

One must remember that gross margins in quick commerce are not the same as profit.

Warehousing and delivery require dark stores, workers and riders, while advertising and platform operations require technology and marketing infrastructure. Even after combining all its revenue streams, the company continued to incur increased losses year on year. Losses widened from ₹1,214.79 Cr in FY24 to ₹4,699.71 Cr in FY25 and ₹5,905.19 Cr in FY26.

Among the costs, the largest item was for purchase of goods sold at ₹18,484.98 Cr, followed by delivery and handling costs at ₹3,046.34 Cr, warehousing at ₹2,149.85 Cr, employee benefits at ₹1,784.67 Cr, advertising at ₹1,389.12 Cr and depreciation at ₹894.26 Cr

Delivery is the second-largest cost in the business, and the one that has proved least willing to fall. In FY26, the cost of delivering a single order was ₹45.74, effectively unchanged from ₹45.80 in FY25, and up from ₹42.05 in FY24. As a share of revenue the line has barely moved either: 13.04% in FY24, 14.39% in FY25, 13.47% in FY26. Revenue doubled over the year, but the cost of putting an order in a customer’s hands has not reduced by much.

Zepto would argue that holding the line flat is the achievement given the volume spike. Order volumes roughly doubled over the same period. The company has said it delivers improvement in adjusted EBITDA per order by reducing the end-to-end cost of fulfilling one. But every other major cost line did fall as a share of revenue, while delivery costs have not.

Zepto counted an average of 221,667 active delivery partners a month across FY26 up from 118,919 the year before and 49,278 in FY24, all of them engaged on a gig model.

In 2026, there is a real price attached to gig worker-reliant operations. The Code on Social Security came into force on November 21, 2025, and it requires platforms to register gig and platform workers and to contribute towards their welfare schemes (1% to 2% of annual turnover, capped at 5%).

Applied to FY26 revenue, the lower end of that range alone would be ₹226 Cr to ₹452 Cr (based on our calculations on the company’s FY26 figures; the code’s definition of turnover may differ), which will definitely hurt the bottomline further at the current levels.

Several states, including Karnataka and Telangana, are separately weighing their own per-transaction levies, and Rajasthan has already passed a gig-worker welfare act whose rules are still to be notified. Zepto is among the platforms that have challenged Karnataka’s Gig Workers Act, arguing that it overlaps with the aforementioned social security code.

For public markets investors, Zepto’s potential high gig worker costs in the future need to be seen along with the costs behind the revenue source that generates more than 70% of the company’s revenue.

Typically speaking, a store owner buys items at a low wholesale price and sells them to customers at a higher price to make a profit. However, Zepto’s latest financial reports show it is doing something different.

During the year, Zepto bought ₹18,485 Cr worth of products to sell. After adjusting for the change in inventory — ₹286.61 Cr on the company’s own figures — Zepto spent a net total of ₹18,198 Cr on the goods it actually moved. Against that, the sale of traded goods brought in ₹17,587.92 Cr, a shortfall of ₹610 Cr.

The company is losing money on goods sold before even counting delivery rider pay, rent, or app costs.

In light of this, Zepto’s margin comes from what it charges around them: the fee merchants pay to have each order stored, packed and delivered, the commission it takes on the sale, and the money brands pay to advertise on the app.

This is perhaps why Zepto is able to forego some fees such as platform fees, handling fees and other charges.

Here, comparisons with rivals also require caution because quick-commerce companies recognise product revenue differently.

Swiggy Instamart largely records commissions and fees from marketplace transactions rather than the full value of the products ordered. Blinkit followed a similar approach earlier but began shifting to a mix of marketplace and inventory-led operations in FY26. The Eternal-owned company now recognises the full selling value wherever it owns the inventory.

In contrast, Zepto’s traded-goods revenue is the value of products moving through its wholesale network. It demonstrates the scale of that network, but not the amount the company ultimately retains.

Will The Other Pieces Fall Into Place? 

Zepto is looking beyond its core grocery business for the next layer of growth. Zepto Café, private labels, Pharmacy and Super Mall allow the company to sell more categories through the same customer app and dark-store network. Whether they improve profitability, however, is still difficult to establish.

Launched in April 2022, Zepto Café is a snacks and beverages delivery service, co-located with Zepto dark stores. In February 2025, Palicha said Café had crossed 1 Lakh daily orders. However, within the same year, the business scaled back in some areas amid supply-chain constraints.

The reversal shows that using the same dark store for groceries and prepared food does not necessarily make the two businesses equally easy to scale. In recent months, questions over food safety have become another cloud on Zepto’s cafe and dark stores.

Private labels offer a different route. Zepto entered the segment in 2023 and now operates labels such as Relish in meat and seafood, Daily Good in staples and Basics in cookware. Owning the label can give Zepto more control over sourcing, pricing and margins than it has while reselling established brands.

But it also makes the company more accountable for product quality and demand. Relish faced customer complaints, following which Zepto reportedly brought Licious back onto the platform.

Zepto Pharmacy and Super Mall take the same idea beyond grocery and food, using the app to sell medicines and a wider assortment of products.

Yet, the UDRHP does not disclose revenue, margins or order volumes separately for these. Investors can see that these businesses exist, but not whether any of them is large enough — or profitable enough — to alter Zepto’s economics.

When Palicha said in February 2025 that Café had crossed 1 Lakh orders a day, he was describing a business that amounts to roughly 4% of order volume, against the 23.3 Lakh orders a day Zepto’s stores handled in the March 2026 quarter.

His $100 Mn annualised GMV claim also points that way — about ₹880 Cr — though gross merchandise value and reported revenue are not the same measure. Both figures are the company’s own, both are more than a year old, and Café has scaled back after they were given by Palicha.

As for pharmacy, the company gives us some indication of the scale. Launched in August 2025 and since rolled out across select cities, it is “fulfilling several orders per day” and remains “at a smaller scale today”, in Zepto’s own words.

Finally, the size of the private labels business cannot be ascertained at all from what has been disclosed — Zepto has not disclosed the order count, the share of basket, or any peer studies. And surprisingly, Super Mall does not appear in the prospectus as a separate focus area.

While its core business seems to be going from strength to strength, the question of thin margins means that Zepto cannot ignore its ancillary businesses entirely.

That is the gap Zepto may need to address as it approaches the public markets. The company has built several possible routes to improve the value of each customer relationship, but the filing does not show which of these bets is working commercially.

The IPO debate will therefore move beyond whether Zepto can launch and scale new categories. It will centre on whether the company can demonstrate that at least some of them improve margins instead of adding another cost weight to the already-imbalanced quick commerce unit economics scale.

[Edited By Nikhil Subramaniam]

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