Zepto's updated IPO papers reveal that founders Aadit Palicha and Kaivalya Vohra received ED summons under FEMA, with the company flagging regulatory risks to investors. The summons, each dated April 8, 2026, required the founders to appear before the agency and furnish documents under proceedings initiated under the Foreign Exchange Management Act (FEMA), 1999. While Vohra appeared before the ED on April 17 and April 22, Palicha appeared on April 20 and May 15, according to the updated draft red herring prospectus filed late on Monday night. The agency sought comprehensive information including foreign and overseas investments, audited financial statements since FY21, shareholding patterns, loans and guarantees, income-tax returns, bank account details, immovable properties, and a note on the company's business model. The company said the founders have submitted the requested information and documents, along with additional details sought by the agency regarding the group's holding structure, corporate scheme, business agreements and invoices. As per the company's latest filing, "As on the date of this Updated Draft Red Herring Prospectus-I, we have not received any further communication from the ED since submitting our response."
Quick-commerce platform Zepto has issued a comprehensive statement denying any operational involvement in the alleged promotion of offshore betting platform Parimatch in India. According to the company's statement, Zepto has fully cooperated with the Enforcement Directorate and shared all information available to the company in connection with the ongoing investigation. The company emphasized that since the campaign was managed externally, it connected the investigating team with the concerned agency to facilitate any additional inquiry. Zepto categorically rejected suggestions that it played an operational role in the matter, stating that any such claims were inaccurate and urging media platforms to report the facts responsibly. In its latest statement, Zepto noted: "Zepto has fully cooperated with the Enforcement Directorate and shared all information available to the company. The matter referenced relates to an advertisement placed (March 2025) through a third-party media agency arrangement for a merchandise entity. Zepto did not directly onboard, contract with, or manage the advertiser in question, and had no involvement in any betting, gaming, payments, user acquisition, or operational activity linked to the entity under investigation." Meanwhile, Parimatch has responded by stating it hasn't broken any laws and is cooperating fully: "We are a legitimate business operating within the law."
The investigation has revealed the substantial scale of alleged money laundering operations through Parimatch. In May, the ED conducted searches at 17 locations linked to the offshore betting platform, seizing around ₹1.2 crore in cash and freezing bank balances worth ₹3.8 crore. The action was part of a money laundering probe into an alleged betting operation that investigators claim generated more than ₹3,000 crore annually. Earlier searches had led to the freezing of assets worth more than ₹110 crore and the seizure of around 1,200 mule credit cards. India's offshore betting market is estimated to exceed ₹85,000 crore, with individual platforms allegedly generating annual revenues of ₹3,000 crore to ₹5,000 crore.
The ED's investigation highlights the growing sophistication of offshore gaming platforms in circumventing regulatory restrictions. Investigators say offshore gaming and betting platforms are increasingly adopting new methods to sustain operations in India amid heightened scrutiny by multiple enforcement agencies. Authorities have flagged a rise in surrogate advertising, covert promotion through messaging applications and the use of social media influencers to market such platforms. The ED has also alleged that Parimatch operated surrogate advertising entities under the names 'Parimatch Sports' and 'Parimatch News'. The ED noted that the platform promoted betting-related advertisements through quick commerce applications and circulated promotional material along with grocery deliveries to attract and onboard new users. Officials noted that several betting operators have created social media pages that appear to provide sports-related content while subtly directing users to gaming applications, with Parimatch's Instagram page containing links that redirected users to the betting platform. The platform also adopted a hyperlocal advertisement strategy by sponsoring teams in local cricket leagues across more than 15 states, besides supporting hockey and football tournaments. A 2022 advisory issued by the Ministry of Information and Broadcasting had cautioned against the promotion of online betting and gambling advertisements.
The Bengaluru-headquartered company had filed its draft papers in December last year through the confidential route and received the market regulator's approval in May this year. Its IPO size is expected to be around ₹10,000 crore. However, Zepto has cautioned investors about regulatory uncertainties, stating it cannot assure investors that there will be no future inquiries or that the matter will not escalate into investigations, legal proceedings or penalties. The company pointed to regulatory uncertainty around foreign investment and e-commerce marketplace rules as a business risk. It said changes in the interpretation or implementation of foreign direct investment (FDI) regulations, including those governing e-commerce marketplaces under FEMA, could require additional approvals and increase compliance costs. Any future amendments to these rules, or adverse regulatory proceedings, could affect the company's operations, growth plans, financial performance and business prospects.
