THE SITUATION
Zelio E-Mobility and Zappfresh (DSM Fresh Foods) defied a bearish mainboard market this week, delivering listing gains of 19% and 26% respectively on the BSE SME platform.
The numbers tell a story of specific capital allocation rather than broad market enthusiasm. Zelio (low-speed EVs) listed at ₹154.90 against an issue price of ₹136, while Zappfresh (D2C meat) hit its upper circuit at ₹126 after a tepid 1.36x subscription.
This matters because it creates a bifurcation in the Indian equities market. While mainboard tech stocks struggle with volatility, the SME exchange has become a shelter for retail capital chasing “profitable growth” stories—Zappfresh is profitable (₹9 Cr PAT) unlike its mainboard-aspiring competitors like Licious.
The anomaly: Low subscription, high listing. Both IPOs saw weak demand during bidding (~1.3-1.5x) but surged immediately upon trading. This suggests underwriters mispriced the risk, or more dangerously, that post-listing liquidity is being artificially sustained by a scarcity of sellers.
WHY IT MATTERS
- For retail investors: The “SME Arbitrage” window is narrowing. The gap between low subscription interest (1.5x) and high listing pops (20%+) signals that gains are now driven by post-listing market making, not genuine book demand.
- For D2C founders: Profitability is the new valuation floor. Zappfresh’s success (₹9 Cr profit on ₹130 Cr revenue) vs. Licious’s struggles (₹163 Cr loss) proves that public markets will reward small, profitable unit economics over large, cash-burning scale.
- For micro-cap funds: Liquidity risk just quadrupled. The divergence between subscription volume (low) and price action (high) indicates a fragile order book—when the correction comes, there will be no buyers at these levels.
BY THE NUMBERS
- Zelio Revenue: ₹94.9 Cr in FY24, up from ₹51.6 Cr in FY23 (Source: Zelio RHP)
- Zelio Profit: ₹6.3 Cr PAT in FY24, doubling from ₹3.06 Cr in FY23 (Source: Zelio RHP)
- Zappfresh Profit: ₹9.05 Cr in FY25, up 94% YoY (Source: Company Filings)
- Zappfresh Revenue: ~₹130 Cr in FY25, growing 45% YoY (Source: Company Filings)
- Licious Comparison: ₹795 Cr revenue with ₹163 Cr EBITDA loss (Source: Entrackr, Oct 2025)
- Zappfresh Subscription: 1.36x overall (Source: BSE SME Data)
- Zelio Listing Premium: 19.5% gain on debut (Source: BSE Data)
COMPANY CONTEXT
Zelio E-Mobility targets the “unlicensed” EV market—low-speed scooters that require no driving license or registration. This regulatory arbitrage allows them to target tier-2/3 cities and teenagers, bypassing the heavy compliance costs faced by Ola or Ather. Revenue scaled from ₹13 Cr in FY22 to ₹94.9 Cr in FY24 without venture capital bloat.
Zappfresh (DSM Fresh Foods) pivoted early from “growth at all costs” to unit economics. While competitors Licious and FreshToHome raised hundreds of millions to capture market share, Zappfresh focused on the Delhi-NCR stronghold and B2B2C channels. They are the first D2C meat brand to list, using the SME route to bypass the rigorous profitability requirements of a mainboard IPO while still offering an exit to early angels.
COMPETITOR LANDSCAPE
In the EV space, Zelio competes with unorganized assemblers rather than Ola Electric or Ather. Ola’s mainboard struggle (high cash burn, service issues) contrasts with Zelio’s lean assembly model. Zelio holds a specific moat: they sell “mobility,” not “technology.” Their customers want a ₹50,000 scooter that moves, not software updates.
In the meat delivery sector, Zappfresh (£280 Cr market cap) is a minnow compared to Licious ($1B+ valuation). However, Zappfresh is profitable. The market is punishing Licious for its burn rate (₹163 Cr EBITDA loss) while rewarding Zappfresh for its 5% PAT margins. This listing forces a repricing of private D2C meat players—investors will no longer accept 20x revenue multiples for loss-making entities when a profitable peer trades at rational multiples on the public market.
INDUSTRY ANALYSIS
The Indian SME IPO market has decoupled from the mainboard. In 2024-25, while the Nifty 50 faced foreign outflows and valuation concerns, the BSE SME index continued to attract domestic retail flows.
The shift is structural: Retail investors are bypassing mutual funds. Instead of paying fees for active management that underperforms the index, retail capital is flowing directly into micro-cap listings where allocation is easier (due to lower subscription rates) and returns are immediate.
However, the sentiment is shifting from “blind buying” to “metric hunting.” The weak subscription numbers for both Zelio (1.5x) and Zappfresh (1.36x) compared to the 100x frenzies of 2023 suggest the “froth” SEBI warned about is settling. Investors are no longer bidding on everything; they are bidding only on profitable SMEs, but they are bidding aggressively once the stock floats.
FOR FOUNDERS
- If you are a D2C founder with ₹50Cr+ revenue: The SME IPO is now a viable Series B alternative. You don’t need to wait for ₹500Cr revenue to list.
- Action: Audit your PAT immediately. If you are profitable (even ₹2-3 Cr), you can command a public market premium that private VCs won’t give you in this funding winter. File for listing within 6-9 months while this window is open.
- If you are building in a “regulated arbitrage” niche (like low-speed EVs): Stay there. Zelio proves that avoiding direct competition with venture-backed giants (Ola) by serving the “ignored” segment (unlicensed drivers) creates a defensible, profitable moat.
FOR INVESTORS
- For micro-cap portfolio managers: The low subscription/high listing pattern is a trap. It implies that price discovery is happening after the liquidity event, not during book building.
- Action: Stop playing the listing pop. Rotate capital into SMEs with >3 years of profit growth (like Zappfresh’s 94% profit jump).
- Signal to watch: Watch the “delivery percentage” on day 3 of these listings. If it drops below 40%, it means the stock is being churned by operators, not held by investors.
THE COUNTERARGUMENT
The counterargument: This isn’t a “flight to quality”; it’s a liquidity trap.
Zelio and Zappfresh listed with low volumes. A 20% gain on thin volume is illusory. If the broader market enters a correction (Nifty down 5-10%), the bid-ask spreads on these SME stocks will widen to 10-15%. You can enter, but you cannot exit.
This view would be correct if: (1) Zappfresh fails to sustain its 5% PAT margin as it expands outside NCR, or (2) SEBI introduces “trade-for-trade” restrictions on SME stocks listing with low subscription numbers, effectively killing the day-trading liquidity that sustains these premiums.
BOTTOM LINE
Zelio and Zappfresh prove that profitability is the only metric that matters in a bearish market. The era of “growth at all costs” private valuations is dead; the public market has set the new standard. Founders must pivot to profit now or face a valuation cliff; investors must distinguish between a “profitable business” and a “liquid stock.”
