Cash-strapped quick commerce startup Dunzo eyes $20 million more from Reliance Retail

Dunzo is looking for a minimum of $20 million (about Rs 165 crore) extra from Reliance Retail, its largest shareholder, after the cash-strapped fast commerce startup fell in need of its goal to lift $75 million by providing convertible notes, individuals conscious of the discussions mentioned.

The Bengaluru-based agency may elevate nearly $45 million in April, as reported first by ET, with solely Reliance Retail and Google subscribing to the convertible notes and its different shareholders staying away. This, the individuals mentioned, has prompted an opposed money circulation state of affairs on the firm.

Dunzo had deferred cost of June salaries above Rs 75,000, as a result of what founder and chief government Kabeer Biswas described as “a cash-flow issue” throughout a city corridor with workers.

Reliance Retail owns a 25.8% stake in Dunzo, whereas Google holds just below 20%. Its shareholding is predicted to extend within the startup if the continuing talks result in the Mukesh Ambani-led conglomerate making an extra funding.

“They need more cash and have held discussions with Reliance Retail to invest around $20 million. It is not clear if Reliance Retail has given any clear answer to that yet,” mentioned one of many individuals briefed on the matter. “Dunzo can’t really tap any other strategic investors because of Reliance’s presence as well.”

Emails looking for remark despatched to Dunzo and Reliance Retail didn’t elicit any response.

In April, ET had reported that whereas Reliance Retail and Google had subscribed to the convertible notes, Dunzo’s capacity to lift capital from different present and new traders would depend upon how the corporate’s business stabilises and it meets sure metrics after it modified its business mannequin.

Dunzo was mentioned to be on an annualised income run-rate of about $300 million, until April, however this appears to have decreased considerably. It has capital to run operations for round 8-10 months, however is trying to reduce prices relentlessly to extend its money runway.

The firm had scaled down the Dunzo Daily grocery quick-delivery companies and laid off round 300 workers.

More adjustments in biz

Dunzo, which can also be backed by enterprise capital funds like Blume Ventures and Lightbox, has been trimming its operations over the previous few months because the hype over fast commerce has settled down. It had shut down half its darkish shops earlier than the April financing. People within the know mentioned this has gone as much as about 70% now.

“You will never see a dark store in Indiranagar (a high-order-density location in Bengaluru) getting shut, but overall they have reduced their own dark stores by 70% now as the focus is to hit operating profitability,” one of many individuals mentioned. The focus has additionally shifted to the business-to-business unit, Dunzo Merchant Services (DMS). Reliance Retail’s JioMart ecommerce arm is the most important contributor to DMS, accounting for greater than 40% of the business.

“CEO (Biswas) has mentioned it internally as well that focus will be on B2B as that will not require the kind of capital needed to sustain Dunzo Daily — where its rivals are still expanding albeit at a much slower space than before,” one other particular person mentioned. According to him, Dunzo nonetheless is the chief within the pick-up-and-drop companies, however just isn’t among the many high two in fast commerce or adjoining companies.

Its rivals in fast commerce embody Swiggy Instamart, Zomato’s Blinkit, BigBasket’s BB Now and Mumbai-based upstart Zepto.

DMS does greater than 30,000 orders a day, largely last-mile supply companies, in seven cities. Dunzo had plans to increase DMS’ operations to fifteen cities however has now cancelled these.

DMS brings in roughly 35% of Dunzo’s revenues. It serves over 25,000 retailers and about 65-70% of them are within the meals area, together with McDonald’s, Licious and Theobroma.

The core crew at DMS is about 20 individuals underneath cofounder Dalvir Suri and vp of gross sales C Sumit Anand. Once clearly separated from the remainder of Dunzo’s operations, the DMS crew is more and more co-ordinating with product and analytics groups within the B2C aspect, individuals within the know advised ET.

Dunzo has platforms for medicines, grocery, pet provide, meat and others. It fees a fee from retailers and a supply price from the platforms’ customers.

Runway extension

After Reliance Retail first invested $240 million in January final yr, Dunzo went on an aggressive marketing campaign to market Dunzo Daily. It had a month-to-month burn of over Rs 100 crore, or round $15 million, throughout the June quarter and in July 2022, ET had reported citing inside displays. It has since scaled down the operations.

“Essentially, it has gone back to the marketplace model and continues to have the partnership model with large retailers. It never ended third-party partnerships but was focusing more on Dunzo Daily,” one of many individuals talked about earlier mentioned.

ET reported final week that the agency internally was trying to reduce prices by 5-7% every quarter, however which will now increase to early double digits.

Meanwhile, capping the June wage cost has affected worker morale and lots of of them are actively searching for different alternatives, sources mentioned.

“No one wants to be caught in the sinking ship … people are trying to jump ship before things get worse,” one of many individuals mentioned, declining to be recognized.