Dunzo Looking For A Distress Sale To Address Financial Woes: Report

Hyperlocal delivery startup Dunzo is reportedly looking for a buyer as the company seeks to address its financial woes via potential sale.

The startup has also approached potential acquirers, including Reliance Retail, Flipkart, PhonePe and Swiggy.

According to a report by Arc Web, the company is looking for a buyer willing to assume its debt of INR 600 Cr and vendor liabilities in exchange for control of the firm. As per the report, Dunzo is now operational profitable, completing 40,000–50,000 daily deliveries.

This development follows recent reports that Dunzo’s cofounder and CEO Kabeer Biswas considering stepping down from the company. Inc42 has reached out to Biswas for comments on the development. The story will be updated based on his response.

Previously, Inc42 reported that Reliance Retail had considered acquiring Dunzo at a heavily reduced valuation. In July, Biswas informed employees that key investors, including Reliance Retail, had committed to injecting additional funds into the company, though this funding never materialised.

However in August, Biswas told its employees that the “fundraising process hit a roadblock, with the management unable to close the transaction.”

According to the report, Reliance distanced itself from the company as it doesn’t want to pay back the debt of the quick delivery startup. 

This led to the company further dragged into the insolvency process as well. 

Notably, two of Dunzo’s creditors – Invoice Discounters of Dunzo Digital and Velvin Packaging – had sought insolvency proceedings against the startup for unresolved payments.

Most recently, in September last year, the NCLT said that the startup failed to resolve its dispute with its creditors despite being given a time of 3 months.

Currently, Reliance Retail holds over 25% of Dunzo’s shares, following a $240 Mn investment in January 2022. 

Dunzo initially launched in 2014, offering pick-and-drop services. The company shifted to quick commerce in 2021 and secured $240 Mn in funding from Reliance Retail in 2022. However, its attempts to expand and innovate within the quick-commerce segment faltered.

At one point, Dunzo also pivoted briefly to a B2B model, delivering to supermarkets after securing funding from Reliance. However, the majority of B2B revenue came from Reliance Fresh only, and the company failed to scale its B2B business on ONDC as it planned in the initial phase. 

Despite this, competitors like Zepto, Swiggy Instamart, and Blinkit focused on introducing new categories and brands, while Dunzo concentrated on scaling its dark stores and B2B operations.

This strategy contributed to mounting losses, leading Dunzo to shut down its dark stores and lay off approximately 75% of its workforce. 

Efforts to raise additional funding at a valuation comparable to Reliance’s 2022 investment were unsuccessful, reportedly causing dissatisfaction among Reliance stakeholders.