Dunzo Looking At Reliance For A $20 Mn Lifeline

SUMMARY

The hyperlocal delivery startup could only raise around $45 Mn in April, with only Reliance Retail and Google subscribing to the convertible notes

Reliance remains interested and should it invest the $20 Mn Dunzo is looking for, the conglomerate would see its shareholding increase in the startup

According to Inc42 sources, Dunzo has reverted to its original business model, wherein it partnered with supermarkets in a revenue-sharing model

Beleaguered quick commerce startup Dunzo is reportedly seeking at least $20 Mn more cash injection from Reliance Retail, its largest shareholder. The report comes as the cash-strapped startup looks to raise $75 Mn by offering convertible notes.

Dunzo had been in talks with its existing investors to raise up to $100 Mn in exchange for convertible notes since January. 

However, according to media reports, the hyperlocal delivery startup could only raise around $45 Mn in April, with only Reliance Retail and Google, two of its largest investors, subscribing to the convertible notes. 

Incidentally, Reliance Retail owns a 25.8% stake in Dunzo, while Google holds just under 20%.

April also saw Dunzo fire 30% of its workforce – around 300 employees – due to the persistent financial troubles at the startup.

The lack of interest in the convertible notes has caused an adverse cash flow situation at Dunzo, according to an ET report citing sources close to the company. Per reports mostly based on anonymous posts on Grapevine, the startup deferred June salaries above INR 75,000 due to ongoing cash flow issues.

Reliance, however, remains interested and should it invest the $20 Mn Dunzo is looking for, the conglomerate would see its shareholding increase in the startup.

Per a person briefed on the matter cited by ET, Reliance has yet to respond to the offer. Dunzo can’t tap any other strategic investors because of Reliance’s presence, meaning that any hopes of some relief rest solely on Reliance’s investment.

Back To Basics

According to Inc42 sources, the hyperlocal delivery startup has reverted to its original business model, wherein it partnered with large grocery stores and supermarkets to fulfil orders in a revenue-sharing model. 

However, quick commerce through dark stores will remain in focus for the startup in certain areas where it is guaranteed high demand and better unit economics. Having shut down multiple dark stores in April, Dunzo is reevaluating more such dark stores and going back to the hyperlocal play in many cities.

To be sure, Dunzo pivoted to a quick commerce model in 2020, when the pandemic drove the demand to an unprecedented peak. As has been proven over the past year, the conditions during 2020-21 were unique and the hype around quick commerce has tempered significantly.

The retreat is also in line with the cost-effective strategy that it is adopting in mid-2023.

At the same time, Dunzo’s focus has shifted to its B2B unit, Dunzo Merchant Services (DMS). Incidentally, Reliance Retail’s JioMart ecommerce arm is the largest contributor to DMS, accounting for more than 40% of the business.

DMS is said to have around 30,000 orders a day, mostly last-mile delivery services, in seven cities. Interestingly, DMS brings in around a third of Dunzo’s revenues and serves some big-name merchants including McDonald’s, Licious and Theobroma.

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