All eyes are now on the Zepto IPO date. As the company filed the updated DRHP outlining plans to raise Rs 8,010 crore in a fresh issue, there’s a lot of buzz about the risks listed in the IPO DRHP.
The IPO DRHP mentions that Zepto’s founders received summonses from the Enforcement Directorate (ED) in April this year. However, it also added that this was for information and documents related to foreign investments, financials, and the company’s business, in connection with proceedings under the Foreign Exchange Management Act (FEMA).
Apart from this key risk, below are 5 other red flags that investors need to be aware of before they decide to subscribe to the issue –
Enforcement Directorate (ED) inquiry
First things first, both Promoters, Aadit Palicha and Kaivalya Vohra, have been summoned by the Directorate of Enforcement. They have both visited the ED office twice. The central agency has asked them to provide information and documents related to foreign investments and the company’s business model under the Foreign Exchange Management Act (FEMA).
Also, details on the company’s holding structure, the Scheme of Arrangement (merger), business agreements, and invoices have been requested from the promoters. While they have complied, future inquiries or legal proceedings could escalate.
Internal control and audit trail weaknesses
Statutory auditors issued qualifications regarding “material weakness” in IT general controls related to managing access and operations in FY24. Furthermore, audit trail features for direct data changes in accounting software were missing or disabled in FY25 and FY26.
During FY24, the company migrated to new accounting software, but the audit trail feature was not enabled throughout the year. Additionally, some “support software” used for recording expenses lacked audit trail functionality entirely.
Heavy losses in subsidiaries
Zepto’s three subsidiaries are loss-making. These subsidiaries are Kiranakart Wholesale, Zepto Marketplace, and Zepto Commerce.
Zepto Marketplace alone reported a loss of Rs 1,528.60 crore in FY26, requiring continued financial support from the parent company.
Consumer protection violations (Dark Patterns)
The Central Consumer Protection Authority (CCPA) has issued notices to the company and its subsidiary for the alleged use of “dark patterns,” including “Basket Sneaking” (adding items to carts without consent) and “Drip Pricing” (hiding fees until the final stage).
Intellectual property challenges
While “Zepto” is a registered trademark, the company has been facing significant hurdles for its other offerings. As of the DRHP date, 34 of its private label brand applications have been opposed, and 14 have been objected to. Trademarks for “Zepto Café” and “Zepto Pharmacy” are also pending.
Impact of new labour codes
As the saying goes, adding to one’s trouble, the upcoming implementation of the Social Security Code, 2020, may reclassify Zepto’s “gig workers” (delivery partners), requiring the company to provide mandatory benefits such as life cover, disability cover, and health insurance, which would significantly increase operating costs.
