How Zappfresh Ground Out Profits In Meat Delivery Ahead Of 2025 IPO

Even as regulations around IPO went stricter, Zappfresh stayed the course to become India’s first profitable meat delivery startup to aspiring for a stock market debut. 

Zappfresh filed its draft papers for a public float on August 27 for listing as a small and medium enterprise (SME). But for six months after it filed the draft red-herring prospectus (DRHP), the startup remained silent on the issue. “A lot has happened since then,” founder and chief executive Deepanshu Manchanda told Inc42.

The Securities and Exchange Board of India (SEBI) tightened the IPO rules for SMEs last December and brought in a host of changes aimed at protecting investor interests and enhancing market integrity. It mandated an earnings before interest, depreciation and taxes (EBITDA) of over INR 3 Cr for at least two out of three financial years preceding the application for a public issue. 

“As of now, the follow-up process with SEBI is underway. We would intimate the timeline for the IPO shortly after that process is done. I anticipate Zappfresh to become a listed entity within 2025,” Manchanda added,” Manchanda added.

According to him, the company is eyeing a fresh capital raise of INR 60 Cr to INR 70 Cr from the public issue. Manchanda reiterated that Zappfresh is the only startup to be making profits in the meat delivery space. He is eyeing a listing by April or May this year. 

Zappfresh’s net profit for the fiscal 2023-24 (FY24) surged 70% to INR 4.7 Cr from INR 2.7 Cr a year back, while its operating revenue surged more than 60% to INR 90.4 Cr from INR 56.3 Cr. Moving forth, Manchada predicts the company’s topline to zoom to INR 140 Cr to INR 150 Cr in FY25 and further surge to INR 260 Cr in FY26.

Meanwhile, the startup’s primary competitors continued to struggle with their bottomline. While FreshToHome’s net loss narrowed 52.18% to INR 149.73 Cr in FY24, Licious managed to curb its losses by 44% to INR 293.77 Cr.

Zappfresh’s Profitability Playbook

One reason for the profitability could be that Zappfresh stayed confined to Delhi-NCR since inception in 2015. In fact, it only expanded to Bengaluru after getting to net profit in FY23. Since then, the startup has expanded to Mumbai and now is eyeing an expansion to the MENA region. 

“It was clear that the meat delivery category operates only at a certain margin which can’t be tampered with excessively. The major focus for us has been on standardising the meat that we deliver and ensuring a consistent delivery pattern. We worked on keeping our corporate overheads very lean and refrained from hiring big,” Manchanda said.

According to its DRHP, the startup employed only 24 employees as of July 31, 2024.

The Zappfresh supply chain links livestock and poultry farmers to its own marketplace. The key points in this chain include the company-owned processing centres and last-mile facilities in Delhi and Bengaluru (as per its DRHP) where portioning and standardisation of sizes takes place. It later set up similar facilities in Mumbai, the founder said.

While the online channel has been integral to its business thus far and key to its profitability, Manchanda said Zappfresh has always been focussed on omnichannel play. 

“We believe that we are solving a legacy issue in a category that is highly monopolistic with local market meat players. While it is a highly unorganised category, it offers a huge opportunity to a player following a more standardised process.”

The Quick Commerce Clouds

Like groceries and fresh produce, meat and seafood delivery has seen unprecedented disruption with the rise of quick commerce.

Licious suffered nearly a 9% decline in revenue in FY24 after it had to withdraw from Dunzo and Swiggy Meatstore, as those companies pivoted. The company also suffered from lower sales in modern trade and local stores in metros thanks to the rapid growth of quick commerce. 

Manchanda said Zappfresh suffered some dents too. Ready-to-eat chicken was hit the most, with customers preferring to get such meats within 10 minutes.

“We have, however, seen that consumers still rely on specialists when it comes to certain categories of meat. Having established standards of quality in red meats and fisheries, we are bullish on these categories moving forth.” 

Manchanda is bullish on seafood, but it won’t be easy to compete with the likes of FreshToHome and Captain Fresh in this category. He did, however, confirm that Zappfresh has plans to acquire companies to grow this vertical.

But quick commerce has not yet convinced the CEO.  “We don’t believe that the customer is coming to us for a 10-minute fix, rather for the quality, consistency and trust that we assure. For at least one year, we are likely to deepen our grip on these aspects and continue to operate in a slot delivery operation. With that, we plan on improving our delivery timelines as well.”

Zappfresh’s Listing Roadmap

Zappfresh was all set to hit the stock market with its public float when the Indian broader market went in a downward spiral, triggered primarily by a sustained exodus of foreign institutional investors (FIIs). Factors like unfavourable macro fundamentals, geopolitical crises, and decline in the rupee worsened the uncertain market conditions. 

Its larger competitor Licious too has reportedly started on the IPO trail and is looking to wrap it up by 2026. The company is also planning a big omnichannel push which will require a lot of investments. So Manchanda sees room to continue growing profitably.

“We currently don’t see bombardment in branding as others are significantly reducing their marketing budgets. This is exceptionally beneficial for us to continue to keep our bottomline in check while expanding,” he said.

As for its own listing, the founder said that the company will move ahead once the market stabilises to some extent and the regulatory approvals are in place. “After the regulatory approvals are in, we would look at listing as and when we see the markets being right. Currently, the markets are volatile and different sentiments occur in different intervals,” he added.