Ahead of Zepto IPO, AICPDF urges Sebi to tighten rules for quick commerce listings

The All India Consumer Products Distributors Federation (AICPDF) has urged the Securities and Exchange Board of India (SEBI) to take urgent regulatory action to protect small retail investors and India’s traditional retail ecosystem from what it described as the risks posed by loss-making quick-commerce and e-commerce companies seeking to go public.

In a representation to the market regulator ahead of the proposed initial public offering (IPO) of quick-commerce firm Zepto, the federation called for a temporary pause on IPO approvals for quick-commerce and closely related e-commerce companies until ongoing proceedings at the Competition Commission of India (CCI) are conclusively resolved.

The industry body also sought tighter scrutiny of IPO structures, particularly those with large Offer-for-Sale (OFS) components. It recommended enhanced disclosures on cost of acquisition for selling shareholders, longer post-IPO lock-in periods, and clearer risk disclosures for retail investors.

Among other measures, AICPDF proposed mandatory prospectus disclosures detailing cumulative losses, trailing cash burn, monthly cash runway, and the extent to which IPO proceeds may be used for discounts or consumer subsidies. It also called for restrictions or escrow conditions on fresh issue proceeds to prevent their deployment toward what it termed predatory pricing practices.

The federation, which represents more than 4.5 lakh distributors and over 1.3 crore kirana and retail outlets across the country, argued that several quick-commerce companies continue to operate with large cumulative losses, negative operating cash flows and unproven unit-level profitability. According to AICPDF, these business models are sustained largely through repeated infusions of private capital, which are used to fund deep discounts, consumer subsidies and capital-intensive dark-store and logistics infrastructure.

“Despite the absence of demonstrated profitability, valuations are often built on gross merchandise value and market share rather than earnings or free cash flow,” the body said.

Citing Zomato and Swiggy IPOs, AICPDF said that both companies listed after years of sustained losses, with IPO structures enabling significant exits by early shareholders, even as losses and negative operating cash flows continued post-listing.

The federation said Zepto’s proposed IPO risks becoming “the next iteration of an exit-driven listing cycle,” enabling another cash-burning quick-commerce firm to tap public markets without adequate safeguards for investors.

AICPDF warned that allowing further exit-oriented IPOs under the current regulatory framework could erode investor confidence, expose retail investors to asymmetric downside risk and accelerate the decline of India’s traditional retail and distribution network.

“India’s capital markets must not become exit routes for business models that are structurally loss-making and sustained only by continuous cash burn,” said Dhairyashil Patil, national president of AICPDF. “When early investors exit through IPOs while losses persist, the risk is unfairly transferred to small retail investors.”

Dr PM Ganeshraam, chief patron of AICPDF, said quick-commerce platforms pose risks beyond financial markets. “Kirana stores are essential for employment, price stability and last-mile access, especially in semi-urban and rural India. Allowing repeated IPOs of loss-making companies without resolving competition law concerns and without robust disclosures undermines trust in India’s capital markets,” he said.

The federation called on SEBI to ensure that investor protection, fair competition and long-term market credibility are prioritised over short-term liquidity exits.