Zepto Must Surge Volumes Post IPO to Fund Growth; Margins Lag Key Competitors

Zepto Must Surge Volumes Post IPO to Fund Growth; Margins Lag Key Competitors​

DAM Capital has released a pointed assessment of quick commerce leader Zepto, concluding that achieving higher order volumes and strengthening unit economics are critical for the company's survival and future scaling. The brokerage emphasized that a timely Initial Public Offering (IPO) is not merely opportunistic but "time-critical" to finance its aggressive growth plans against highly capitalized rivals like Blinkit and Instamart.

The report highlighted that Zepto is currently focused on an order maximization strategy, evidenced by its stores processing approximately 2,140 orders per day in the fourth quarter of FY26. This contrasts with Blinkit's 1,425 orders and Instamart's 1,093 orders during the same period. However, this volume-driven approach is currently hampered by lower net order values and a low free-delivery threshold.

##Unit Economics vs Competitors in Quick Commerce Battle

While Zepto boasts high store productivity, comparative analysis reveals significant challenges in monetization. In Q4 of FY26, Zepto generated a net revenue value of ₹387 per order. This falls short compared to Blinkit, which achieved ₹525 per order. Gross margin for Zepto stood at 18 percent, notably behind Blinkit's 27 percent performance.

Furthermore, the adjusted EBITDA margin for Zepto is currently minus 16 percent, closely aligned with Instamart’s minus 15 percent. This places Zepto significantly behind Blinkit, which has managed to turn its adjusted EBITDA positive in the fierce competitive quick commerce space. Analysts note that rivals like Amazon and Flipkart Minutes are ramping up investments, keeping customer acquisition costs elevated for all players.

##Funding Runway and Store Expansion Pace

The brokerage estimates that at a current cash burn rate of approximately ₹1600 crore per quarter, Zepto's funding runway provides only three to three-and-a-half quarters if the existing expansion pace is maintained. This situation underscores the necessity of securing capital through the proposed IPO, which targets an raise of ₹8000 crore.

Regarding physical expansion, Zepto ended FY26 with 1,139 dark stores across 66 cities, adding a net total of 110 stores during the year. This represents a sharp slowdown compared to the 692 net additions recorded in FY25. In comparison, Blinkit substantially expanded its network, reaching 2,243 outlets after adding 942 stores, while Instamart added 122 stores to reach 1,143 total outlets.

##Path to Profitability and Strategic Imperatives

DAM Capital estimates that Zepto must lift average orders to around 3,000 per store per day to successfully achieve adjusted EBITDA breakeven. Achieving this goal also requires adjusting the free-delivery threshold from its current range of ₹99-₹199. However, raising this threshold carries a risk of losing low-ticket orders that currently drive volume.

Despite the slowdown in net new store additions, Zepto recorded the highest store productivity among the three players. The company averaged approximately 1,677 orders per store per day, compared to 1,417 for Blinkit and 1,044 for Instamart. DAM Capital attributed this strong productivity to Zepto's densification strategy, which has successfully reduced average delivery distances and improved store utilization.

##Market Share Gains Mask Monetization Concerns

While the need for operational improvement is clear, DAM Capital noted that Zepto’s relative market share among the top three quick commerce players has increased significantly, moving from 26 percent in FY24 to approximately 33 percent in FY26. The gains, however, have primarily been driven by a lower free-delivery threshold.

This focus on acquiring volume through low thresholds has weighed heavily on monetisation efforts compared to Blinkit's model, which has managed to increase volumes while consistently reducing losses and achieving positive adjusted EBITDA performance. Unlike Blinkit and Swiggy, Zepto currently lacks a profitable adjacent business line to cushion the quick commerce losses, making it heavily reliant on external capital injections for continued growth.