Mutual Funds Demand Lower Valuation for Zepto's Upcoming IPO

New Delhi, India Jul 27, 2026 ALN: Mumbai: Leading domestic mutual funds have expressed concerns regarding the valuations sought by quick commerce startup Zepto for its upcoming initial public offering (IPO). This pushback could complicate the company's plans for an early launch of its highly anticipated issue.

The asset managers, who are among the largest investors in recent IPOs, have communicated to Zepto's representatives that they would be uncomfortable subscribing to the offering, even at the lower valuation currently under consideration, according to sources familiar with the discussions.

Zepto has reportedly proposed reducing its IPO valuation expectations to around $4-5 billion, significantly lower than its peak valuation of $7 billion achieved in October 2025, when it secured a $450 million funding round from US pension fund CalPERS. This substantial drop in valuation reflects the broader market sentiment and the increasing scrutiny of new-age startups, particularly those in the quick commerce sector, which has seen rapid growth but also intense competition.

However, major mutual funds and large domestic insurers are seeking valuations that are 30-40% below the revised IPO target of $4-5 billion. This has prompted bankers and one of Zepto's prominent investors to scramble in an effort to persuade these money managers to find a middle ground. They have also intensified efforts to garner support from a broader range of wealthy high-net-worth individuals (HNIs) and large family offices, which could provide an alternative source of capital and help bolster demand for the IPO.

As Zepto aims to launch its IPO of up to ₹8,010 crore within the next two weeks, sources indicate that the company hopes to finalize negotiations with asset managers by Tuesday, although mutual funds have yet to reach a consensus on the offer. The timing of the IPO is critical, as market conditions can fluctuate, and securing a favorable launch window is essential for maximizing investor interest.

One insider noted, "Most of the large mutual funds are yet to confirm their participation at least till the weekend due to significant disagreements over valuations." This uncertainty highlights the challenges faced by Zepto in aligning its valuation expectations with those of potential investors, particularly in a market that has become increasingly cautious about the financial health and growth prospects of newly public companies.

The involvement of domestic funds and insurers is critical for the IPO's success, as these institutions have historically been the largest participants in anchor books and pre-IPO funding rounds for recent share sales. Their dominant presence has also afforded them considerable leverage in negotiations regarding share sales, with some top funds exerting significant influence over IPO pricing. This dynamic can create a challenging environment for companies like Zepto, which must navigate the expectations of these powerful investors while also attempting to achieve their own financial goals.

A senior official from a large mutual fund remarked, "What we are saying is if you can secure participation from the majority of the other big funds, we will also reconsider our position." This statement underscores the collective nature of investment decisions among large mutual funds, where consensus can significantly impact the overall success of an IPO.

Fund managers have pointed out that Zepto is attempting to benchmark its IPO valuation against established rivals like Eternal and Swiggy. However, investors are skeptical of this rationale, as Zepto does not operate a food delivery service, which is a key component of the business models and valuations of both competitors. Instead, Zepto is focused solely on the highly competitive quick commerce market, which includes groceries, electronics, and other everyday items. This distinction is crucial, as it highlights the unique challenges faced by Zepto in differentiating itself from its more established counterparts.

Moreover, fund managers are cautious about agreeing to higher valuations in light of the post-listing performance of some new-age businesses. For instance, Swiggy, which went public in November 2024, is currently trading below its IPO price, with shares priced at ₹251.50—approximately 35% lower than its IPO price of ₹390 per share. This trend has led to increased skepticism among investors regarding the long-term viability of high valuations for newly listed companies, particularly in sectors that are still maturing.

In previous instances, mutual funds have faced criticism for subscribing to IPOs at inflated valuations, which has resulted in significant losses for their investors. This has created a more cautious investment environment, where fund managers are increasingly prioritizing due diligence and valuation assessments before committing capital to new offerings. As a result, Zepto's ability to present a compelling case for its valuation will be crucial in securing the necessary support from these institutional investors.

As the situation unfolds, Zepto's ability to navigate these valuation challenges will be crucial for its IPO success. The company's management will need to engage in transparent discussions with potential investors to understand their concerns and adjust their valuation expectations accordingly. Additionally, they may need to articulate a clear growth strategy that demonstrates the company's potential to capture market share in the competitive quick commerce space.

Furthermore, the broader implications of this situation extend beyond just Zepto. The ongoing discussions around its IPO highlight a significant shift in investor sentiment towards new-age startups, particularly those in sectors that have seen explosive growth but also face substantial operational challenges. As investors become more discerning, companies in similar spaces may need to reassess their valuation strategies and business models to align more closely with market expectations.

Ultimately, the outcome of Zepto's IPO will serve as an important case study for other startups in the quick commerce sector and beyond. Investors will be closely watching how the company addresses these valuation concerns and whether it can successfully navigate the complexities of the public . The success or failure of this IPO could set precedents for future offerings in the sector, influencing investor behavior and shaping the landscape for new entrants in the market.