An early backer of Flipkart, Tiger has of late been sparing in its investments worldwide, but now appears to have set sights on the buzzing Indian quick commerce sector.
“Tiger has been visiting Zepto’s dark stores for a more intricate understanding of operations,” said one of the people cited above, adding that the New York-based firm is seeing “how it (Zepto) differentiates in execution from others, as well as what’s playing out differently in India compared to global markets.”
ET reported on September 7 that the startup is deep in talks with merchant bankers for an initial public offering (IPO) next year.
For Tiger, “the idea is to engage (with Zepto) and have a relationship from now on for the next round of funding before an IPO—a typical practice for most late-stage startups,” another person said.
Zepto, which raised more than $1 billion in two months, has not begun a new round formally, but has had various degrees of engagement with interested parties for a possible pre-IPO round, according to the people cited above.
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ETtechAnother person aware of deliberations said the quick commerce player is aware of the external diligence also being carried out in the market. “There has been some conversation between the two parties on financial metrics and the current state of the business,” this person said, adding that Zepto is engaging with cross-over funds who typically invest before an IPO.
Zepto chief executive Aadit Palicha declined to comment, while an email sent to Tiger Global did not elicit any response till press time on Friday.
How quick is it?
The world is watching India’s red-hot quick commerce sector, which is growing much faster than anticipated.
As Zepto challenges the market leadership of Zomato-owned Blinkit, rival Swiggy Instamart has also made significant investments, with more expected in the next couple of years. Additionally, Tata-owned BigBasket has made a full pivot to quick commerce.
Walmart-owned Flipkart has also entered the fray and is scaling its operations.
Top venture investors and startup CEOs in India are of the view that heavy fund inflows into domestic quick commerce are in large part due to a paucity of success in such ventures globally, forcing massive consolidation, exits and business cutdowns.
For instance, Turkey’s Getir — where Tiger Global is a key investor — has exited markets such as the US and UK to focus on its home turf. The valuation of this breakout fast delivery startup has fallen from $12 billion to around $2.5 billion, following a series of layoffs. A report in Bloomberg said it has explored a merger with German rival Flink.
The quick commerce sector in India is a huge contrast. “Swiggy is going public, while Zomato is already listed,” a top industry executive said. “Among the top three, Zepto is where investors can come in at a good price, given its long-term plans and the market potential. This has led to several blue-chips looking at quick commerce seriously.”
Mars Growth (via Dragon Fund) and General Catalyst entered the Zepto cap table in its latest round.
In the past year, Zepto has seen its valuation grow 3.5 times.
A report by CLSA earlier this month said the quick commerce market is projected to grow from $3.8 billion in FY24 to $78 billion by FY34, achieving a 69% compounded annual growth rate from FY24 to FY27.
Zomato’s Blinkit, Swiggy Instamart and Zepto collectively hold over 90% market share, with Blinkit leading at 39%, according to CLSA.
A JP Morgan report this month pegged Blinkit’s market share at 40%.
“Additions in dark stores, or fulfilment centres, are on the cusp of a rapid acceleration, with unit economics falling into place for the top players, especially Blinkit and Zepto,” the CLSA report said.
Quick commerce now accounts for almost half of India’s online grocery spend and is growing rapidly, the JP Morgan report said, adding that rapid deliveries account for more than half the e-grocery shopping over the last six months.
For the current financial year, based on public filings and private data, Swiggy Instamart has a gross order value run rate of $1.3 billion, compared to Blinkit’s run rate of over $2 billion, and Zepto’s $1.5 billion.
Not yet a roar
Apart from Zepto, Tiger Global is also investing in Meesho as part of a $500-million round including primary and secondary share sale, as reported by ET earlier. It has not cut any other cheque in India.
One of the investor’s portfolio firm founders told ET that most late-stage startups now report to Tiger Global founder Chase Coleman’s team, while executives in Singapore help on operational aspects. Partner Alex Cook, who has worked closely with Indian founders, is leaving the firm, while cofounder of Tiger’s PE investing arm, Scott Shleifer, has already departed.
Tiger Global raised $2.2 billion for its latest venture capital fund in April. This is around one third its target of $6 billion that investors were told about earlier, a report in the Financial Times said.
Tiger Global, apart from SoftBank, is among the most aggressive investors in the Indian startup ecosystem.
