Cash-Strapped Dunzo Might See Valuation Drop To $200 Mn In $35 Mn Rights Issue

Beleaguered quick commerce startup Dunzo is seeking a final nod from its board to raise up to $35 Mn through a rights issue.

Yet, this fundraising round could face hurdles over valuation disagreements. Numerous investors are currently eyeing a $200 Mn valuation, significantly lower than the previous valuation of Dunzo set at $800 Mn, as per an ET report.

The publication highlighted that while several current investors are ready to pledge between $10 Mn – $15 Mn at this slashed valuation, the Dunzo board’s approval is still pending.

CEO Kabeer Biswas is anticipated to rally for this clearance, liaising with major shareholders such as Reliance Retail and Google to finalise the funding. The challenge, however, could be to negotiate with Reliance Retail, which previously opposed any devaluation of Dunzo.

Reliance Retail owns a 26% stake in the startup and has the right to veto any board decisions. It had invested $200 Mn during the $240 Mn funding round in January 2021.

Facing layoffs, consistent salary delays, and the impending departure of two cofounders, Dunzo is now contemplating phasing out its consumer segment to concentrate solely on its B2B operations.

Dunzo Killing Off Quick Commerce Business?

The recent times, the hyperlocal delivery startup has significantly scaled down its quick commerce operations to conserve cash. It shifted from managing its own dark stores for customer service, returning to its initial business model of collaborating with third-party grocery stores.

Dunzo now has a few dark stores, all in Bengaluru, after failing to gain enough traction across the country amid competition from the likes of Instamart, Blinkit and Zepto.

The ET report, citing sources, highlighted that the future of Dunzo’s consumer-facing operations appears grim. Recent discussions have considered entirely scrapping this aspect, signaling a potential end to the quick commerce model introduced by Dunzo.

Dunzo anticipates 70-80% of its operations to be channeled through Dunzo Merchant Services, its B2B division, the report added. Within the company, this is also perceived as a delivery service, but catering specifically to B2B clientele like JioMart.

The developments at Dunzo come at a time when recent company filings revealed that about five members had exited from its board of directors over the past two months.

These include — the two cofounders — Dalvir Suri and Mukund Jha, Ashwin Khasgiwala, group chief of business operations at Reliance Retail, and Rajendra Kamath, finance head at Reliance Retail, left the Dunzo in the recent months.