With New Marketplace Entity, Zepto Simplifies its Structure Before Going Public

Nitin Konde, Varun Bhardwaj

Jan 4, 2025 — 3 min read

Zepto Streamlines Structure with New Marketplace Entity Ahead of IPO

According to various media reports, Zepto, the unicorn of rapid commerce, has established Zepto Marketplace Private Limited as a new company to streamline its business practices before going public later this year. Currently, the business uses a business-to-business (B2B) form of operation. Under a licensing arrangement for consumer-facing sales, its Indian subsidiary, Kiranakart Technologies Pvt Ltd, which was established by Aadit Palicha and Kaivalya Vohra, purchases products from brands and sells them only to a specific group of businesses that run the Zepto platform.

Its competitors, like Swiggy Instamart and Blinkit, which is owned by Zomato, have long used a marketplace model that allows several suppliers to post goods directly for customers. Zepto now seems to be doing the same. In an apparent indication of a potential departure from its business-to-business approach, it registered Zepto Marketplace Private Limited on October 22, 2024. As it completes preparations for an India IPO later this year, this change may bring Zepto's operations closer to those of its publicly traded competitors, Blinkit and Swiggy Instamart.

The Move will Help Investors to Evaluate Zepto’s Operations

Investors, particularly those in the public market, will be better able to compare Zepto's operating data to those of its competitors once a consistent business model is established. Another media article, however, made it clear that the new corporation was simply registered in order to transfer the company's tech-related intellectual property (IP) and online platform. According to this report, the decision to place the company's technology division on a separate balance sheet will aid in separating the various business divisions.

Current Business Model of Zepto

Geddit Convenience, Drogheria Sellers, and Commodum Groceries are the three businesses to which Zepto licenses its brand name and business operations under the current arrangement. These three businesses use the Zepto platform to sell to final customers after buying their merchandise from Kiranakart Technologies Pvt Ltd.

Kiranakart Technologies is essentially a business-to-business (B2B) company that sources and purchases goods directly from brands and resells them to Zepto's three licensee businesses. These businesses subsequently sell to final customers. The three businesses pay Zepto a licensing fee for each sale they make through the latter's platform.

According to sources, Zepto has already added additional sellers and plans to continue growing its seller and distribution base with the assistance of the new organisation. It also plans to lessen its focus on the three businesses (Geddit Convenience, Drogheria Sellers, and Commodum Groceries). Other than Geddit Convenience, Drogheria Sellers, and Commodum Groceries, more sellers are probably going to start selling on the Zepto platform in the upcoming months.

Competitors Adopting Different Approach

Blinkit is a platform where businesses like Hands On Trade, 90Minutes Retail, and others buy products from brands and resell them to B2B wholesalers, who resell them to other businesses (B2C sellers). Zomato, the holding company of Blinkit, appears to have structured its operations to guarantee adherence to foreign direct investment (FDI) regulations while avoiding the purview of related party reporting and consolidation.

International e-commerce firms are able to function autonomously as marketplace enterprises in India. However, international retail corporations are not allowed to operate independently in offline retail due to restrictions governing foreign direct investment (FDI). Only 51% of foreign direct investment (FDI) in multi-brand retail is permitted, and only through local partnerships. Even then, permission from the government is needed.

Under the government clearance method, however, 100% FDI is permitted in food retail to function and operate both online and offline for food that is made and manufactured in India. With businesses like Scootsy, Lynk Logistics, and others that function as B2B wholesalers, Swiggy Instamart has also created a company structure that is similar. These businesses then sell their goods to other businesses that run dark stores, which in turn sell to the B2C vendors on the Swiggy network.

In short, there is an extra layer of sellers and distributors on both Blinkit and Swiggy Instamart. Although Zepto lacks this additional layer, it is possible that the structure will alter if Zepto Marketplace Pvt Ltd is established.