Zepto’s unique corporate structure is raising regulatory eyebrows as the quick commerce company prepares for its stock market debut, the Economic Times reported, citing industry executives, analysts, and institutional investors.
While competitors like Blinkit use an inventory-led model and Swiggy’s Instamart follows a marketplace structure, Zepto utilises a hybrid wholesale-plus-marketplace architecture, allowing it to book gross revenue from direct product sales alongside earnings from commissions, logistics, marketing, and processing fees.
“The structuring is not illegal but it makes it the most exposed to regulatory scrutiny among its peers if the government were to reinterpret the FDI rules as it has done before,” ET quoted as said by a senior fund manager at a domestic mutual fund.
Current Indian foreign direct investment (FDI) guidelines state that companies backed by majority foreign ownership, including Zepto and Swiggy, are not permitted to operate pure e-commerce marketplaces and are strictly banned from holding inventory.
Management has been actively pitching the public issue to mutual funds and institutional investors over the past few weeks.
“Zepto’s wholesale-plus-marketplace structure could attract greater regulatory scrutiny. First, it has created a B2B intermediary for external platforms, which, even if technically compliant, invites closer scrutiny. Second, the merchant partners Zepto works with appear to have little business outside the platform,” a Mumbai-based analyst, requesting anonymity, at a global brokerage pointed out.
‘Complex’ revenue streams
Separately, several brokerages have raised concerns regarding Zepto’s financial disclosures, pointing out that its revenue reporting model complicates direct comparisons with its listed competitors.
According to its updated DRHP, the company’s business spans wholesale trading, marketplace operations, delivery logistics, advertising, and platform solutions across various corporate entities, amplifying the complexity of its overall operations.
Swiggy’s Instamart, on the other hand, still functions as a third-party marketplace, though the management has signalled plans to transition into an IOCC once its domestic shareholding crosses the 50 per cent threshold, reported ET.
In a research note dated June 30, JP Morgan highlighted Blinkit’s operational structure as the most secure against regulatory interventions, while flagging Zepto’s foreign-backed wholesale-and-marketplace model appears the most vulnerable to shifting policy frameworks or regulatory audits.
Zepto, however, did not reply to detailed questions seeking comment, ET said in the report.
Zepto Limited, the parent company heading for public listing, owns the firm’s intellectual property, including the flagship Zepto brand name and its private labels. This parent entity runs the customer-facing digital marketplace, absorbs employee costs, pays dark store lease rentals and delivery expenses, and books advertising revenues.
Its wholly owned unit, Kiranakart Wholesale Pvt. Ltd., manages wholesale sourcing and product distribution, including fruits and vegetables. Though India allows 100% FDI in wholesale commerce, analysts emphasise that operating a wholesale engine alongside a consumer marketplace has become a focal point for anxious investors and regulators alike.
Another subsidiary, Zepto Marketplace Pvt. Ltd., handles backend coordination between online customers and registered merchant partners. This arm also licenses trademarks and intellectual property assets from the parent firm. The DRHP said that the subsidiary pays the parent entity a brand royalty fee pegged at 0.1% of gross merchandise value under a commercial contract enacted on January 13, 2025.
Bank of America remarked that Zepto’s financials remains difficult to compare against its peers because it recognises revenue more like a traditional inventory-heavy business rather than following Swiggy’s commission-driven marketplace model.
The brokerage underscored that even though items are purchased from independent merchants on the app, the revenue from those traded goods is recorded via Zepto’s wholesale sourcing and distribution arm rather than as straightforward direct-to-consumer inventory sales. This specific accounting mechanism, the brokerage stated, is why Zepto’s reported top-line revenues cannot be directly compared with Swiggy’s, despite both being foreign-owned companies.
