New Delhi: Quick commerce unicorn Zepto has identified a history of significant operating losses, recent summons from the Enforcement Directorate to its promoters, and intensified regulatory scrutiny over consumer protection as primary risk factors for its upcoming initial public offering (IPO).
In its updated Draft Red Herring Prospectus filed Monday, the Bengaluru-headquartered firm disclosed that it has incurred losses in every fiscal year since its inception in July 2021, and warned that it may continue to face negative cash flows as it expands its operations.
“We may continue to incur losses and negative cash flows from operating activities as we invest in expanding our user base and technology infrastructure, adding new product categories to our platform, expanding our private labels, expanding our supply chain operations, increasing the count of dark stores, and developing and improving the brand and visibility of our platform, among others.
“There is no assurance that such investments will enable us to increase our revenue in the future,” Zepto said.
Further, the company said its revenue growth may decline due to slowing demand, limited product categories that do not sufficiently address customer needs, or insufficient growth in the number of platform participants caused by increasing competition, alongside rising regulatory and compliance costs, among other factors.
The document showed that Zepto saw its net loss widen to Rs 5,905.19 crore in fiscal year 2025-26, from a loss of Rs 4,699.71 crore in the previous fiscal, whereas the company’s revenue from operations more than doubled during the fiscal year, reaching Rs 22,623.58 crore in FY26 compared to Rs 11,109.94 crore in FY25.
For the quarter ended March 31, 2026, Zepto narrowed its net loss to Rs 1,538.67 crore, down from Rs 1,831.91 crore in Q4 FY25. Quarterly revenue climbed 75.26 per cent to Rs 7,497.64 crore, up from Rs 4,278.06 crore in the corresponding period last year.
A significant legal risk identified in the papers involves summons issued by the Directorate of Enforcement to promoters Aadit Palicha and Kaivalya Vohra on April 8, 2026. The directives required the founders to produce documents and information related to foreign investments, shareholding patterns, and their business model.
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“While, as on the date of this Updated Draft Red Herring Prospectus-I, we have not received any further communication from the ED since submitting our response, we cannot assure you there will not be future inquiries or that these could escalate to investigations, legal proceedings or any possible penalties,” Zepto said.
Zepto also detailed ongoing challenges with the Central Consumer Protection Authority regarding the alleged use of ‘dark patterns’ (or deceptive design patterns) on its platform, including basket sneaking, misleading advertisement, and drip pricing.
The regulator imposed a penalty of Rs 7 lakh for failing to adhere to guidelines against dark patterns, an order which the company has appealed before the National Consumer Disputes Redressal Commission.
The firm disclosed that an interim stay has been granted in the matter but warned that any adverse outcome or changes in the interpretation of governing laws could affect its operations and business prospects.
Operational dependencies form a core part of the company’s risk profile, with Zepto highlighting that its delivery model depends heavily on the location, size, and density of its dark store network.
“Our failure to manage and expand our dark store network cost-effectively could have an adverse impact on our business, financial condition, cash flows and results of operations,” said Zepto.
Zepto currently has a total of 1,139 dark stores, up from 1,029 in 2025 and 337 in 2024.
PTI