ETtech Explainer: Why Zepto founders are taking personal debt to boost Indian ownership
Zepto
cofounders Aadit Palicha and Kaivalya Vohra are in the market to raise personal structured debt as the
quick commerce
player prepares for a D-Street debut,
ET first reported
on Monday.
Edelweiss
Alternative Asset is likely to anchor the deal, while domestic family offices and smaller credit funds will pitch in.
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But why personally raise funds in the run-up to their company's
IPO
? With these funds, Palicha and Vohra intend to buy stake from foreign investors of Zepto before the company goes public.
Here's a detailed look at the Zepto promoters' fundraise and the reasons behind it:
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What's happening at Zepto?
Palicha and Vohra have dialled Edelweiss, domestic family offices and smaller credit funds to raise Rs 1,500 crore, or nearly $750 million.
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To be sure, it's not Zepto that is raising this debt; the cofounders are doing this on a personal level — they have pledged a portion of their personal equity in Zepto as security for this debt financing.
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Edelweiss has submitted a binding term sheet to anchor the deal, committing to pay half of the abovementioned amount. The three-year loan comes with a minimum interest rate of 16%, plus an equity-linked upside taking returns to about 18%.
The remaining Rs 750 crore will come from the domestic family offices and credit funds expected to participate in the debt deal.
The deal is being executed at a valuation of $5 billion, the same as when Zepto raised equity financing last year.
As
Zepto IPO
approaches...
By picking up debt to acquire existing shareholders' stake, Palicha and Vohra will raise their ownership to 20% from the current 18%. The quick commerce startup counts Nexus Venture Partners, Y Combinator and General Catalyst among its backers.
Zepto's domestic shareholding is expected to rise to more than 30% once the deal is finalised, a person familiar with the development said. This improves compliance with India's
FDI norms
for online retail before the company files draft papers for its IPO.
What FDI rules say
India allows 100% foreign direct investment (FDI) in online marketplaces, but allows only Indian Owned and Controlled Companies (IOCC) to sell their inventory online — critical for quick commerce layers. To qualify as an IOCC, companies need to have at least 50%
Indian ownership
.
Earlier this month,
Zomato
's parent
Eternal capped foreign ownership
at 49.5%. Shareholders are scheduled to vote on the motion in May.
Structuring debt
Palicha and Vohra are doing something rare among Indian new-age companies with this deal — pledging founder shares. Companies in traditional segments usually undertake promoter financing deals, but it is uncommon for high cash-burn tech startups like Zepto to take this route. The quick commerce sector overall is facing a monthly cash burn of Rs 1,300–1,500 crore, according to ET reports.
Promoters at edtech unicorn Byju's, e-pharmacy PharmEasy, and hotel aggregator Oyo had opted for this route in the past. Byju's defaulted and is now
facing insolvency
, and PharmEasy saw its
valuation cut by more than 90%
.
Zepto's broader strategy
Along with the promoters' personal debt financing, Zepto is also close to finalising a $250-million secondary sale led by private equity firms, including
Motilal Oswal Financial Services
.
These two moves together are expected to boost Indian shareholding at Zepto by another 8–10%, ensuring compliance with FDI norms before the IPO paperwork is filed.
Zepto had earlier merged its Singapore-based parent into its Indian entity and renamed itself Zepto Pvt Ltd,
rebranding
itself in a 'reverse flip' to India before debuting on the exchanges here.
The bigger picture
The structured personal debt raise highlights how India's startups are adjusting to tighter capital conditions and preparing for domestic markets.
For Zepto, boosting Indian ownership is about more than compliance — it's about being seen as a long-term player in India's fast-changing digital economy.
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