The asset managers, among the biggest investors in recent IPOs, have told Bengaluru-based Zepto’s representatives in recent discussions that they would not be comfortable subscribing to the issue even at the lower valuation being considered by the company, three people familiar with the matter told ET.
Zepto is said to have offered to cut its IPO valuation expectations to around $4-5 billion, below the peak valuation of $7 billion in October 2025, when the company secured a $450-million funding from US pension fund CalPERS.
Sources said the top mutual funds and large domestic insurers are seeking valuations 30-40% below even the reduced IPO valuation of $4-5 billion, sending the bankers and one of Zepto’s prominent investors scrambling to persuade money managers to meet the company mid-way. They have also stepped up efforts to line up support from a wider section of deep-pocketed High Networth Investors (HNIs) and large family offices.
Mutual funds and insurers want valuation 30–40% below firm’s $4–5 billion target
An email query to Zepto went unanswered until the publication of this report.
Zepto is aiming to launch its IPO of up to ₹8,010 crore over the next two weeks. Sources said the company hopes to conclude negotiations with the asset managers by Tuesday, though mutual funds have yet to agree on its offer.”Most of the large mutual funds are yet to confirm their participation at least till the weekend because of serious differences over valuations,” said one of the people in the know on condition of anonymity.The participation of the domestic funds and insurers is considered crucial for the success of the IPO as these cash-flush institutions have been the largest participants in anchor books and pre-IPO funding rounds in recent share sales. Their dominant presence has also given them an upper hand in share sale negotiations with companies with some of the top funds even having a significant say in IPO pricings.
“What we are saying is if you can get the participation of the majority of the other big funds, we will also look into it again,” said a top official with a large mutual fund, who did not want to be named because of the sensitive nature of the discussions.
Fund managers said Zepto wanted to benchmark its IPO valuation against listed rivals Eternal and Swiggy. Investors, however, did not buy the logic because Zepto lacks a food delivery business, which forms a key part of both companies’ operations and valuations. Zepto operates only in the ultra-competitive quick commerce market spanning groceries, electronics and other everyday items.
Fund managers are also wary of agreeing to higher valuations following the post-listing share price performance of some of the new-age businesses. For instance, Swiggy, which listed in November 2024, is still trading below its IPO price. The stock is at ₹251.50, about 35% below the IPO price of ₹390 apiece. In some of the new-age company issuances in the past, mutual funds have been slammed for subscribing to these IPOs at peak valuations.
