Dunzo Spent INR 9 To Earn Every Single Rupee From Operations In FY23

Reliance-backed troubled quick commerce startup Dunzo’s loss nearly quadrupled in the financial year ended March 31, 2023. The Bengaluru-based hyperlocal delivery startup’s loss surged to INR 1,801 Cr in the financial year 2022-23 (FY23) from INR 464 Cr in the previous fiscal year. 

Meanwhile, operating revenue increased 317% to INR 226.6 Cr in FY23 from INR 54.3 Cr in FY22. The startup primarily earned revenue from selling products to its customers from its dark stores. Dunzo earned INR 141.5 Cr from sales of products in FY23, an increase of 67.3X from INR 2.1 Cr in the previous fiscal year. 

Founded by Kabeer Biswas, Dalvir Suri, Mukund Jha, and Ankur Aggarwal in 2015, Dunzo connects consumers with stores and vendors in their vicinity and facilitates deliveries of products such as grocery, medicines, food and other everyday items.

It must be noted that the startup pivoted to the dark store business in early 2020, following in the footsteps of Swiggy’s Instamart and Blinkit, now owned by Zomato. However, amid the financial challenges, the startup has shut a majority of its dark stores over the last few months and is now partnering with retail stores to provide logistics services on a revenue-sharing model.

Where Did Dunzo Splurge?

The Bengaluru-based startup’s total expenses jumped over three-fold during the year under review. The Lightspeed-backed startup’s total expenses ballooned 286% to INR 2,054.4 Cr in FY23 from INR 531.7 Cr in the previous fiscal year.

Procurement Costs See The Biggest Jump: Dunzo’s procurement expenses surged 9,079% to INR 174.4 Cr in FY23 from INR 1.9 Cr in FY22. Procurement costs is the money spent by the startup on purchasing grocery and other related items from FMCG brands.

Advertising Cost Rises Nearly 5X: The startup’s advertising cost increased 381% to INR 309.7 Cr in FY23 from INR 64.4 Cr in FY22. It must be noted that Dunzo spent heavily during the Indian Premier League 2022 to grab more eyeballs. 

Employee Benefit Expenses Jump: Employee costs increased 2.4X to INR 338 Cr from INR 138.3 Cr in FY22. Employee benefit expenses generally comprise salaries and wages of employees. It must be noted that the startup has laid off a majority of its workforce over the last few months and has withheld employee salaries for some months since July 2023 amid a severe cash crunch. 

Runner Contract Fee & Incentives: Dunzo spent INR 367.4 Cr on its delivery agents, an increase of 174% from INR 134 Cr in FY22. This increase can be attributed to the startup increasing the number of delivery agents to expand its quick commerce service.

Additionally, order cancellations cost Dunzo INR 44.2 Cr in FY23, an increase of 232% from INR 13.3 Cr in FY22. 

On a unit economics level, Dunzo spent INR 9 to earn every INR 1 from operations in FY23. Its EBITDA margin deteriorated  to -678.6% in FY23 from -645% in FY22. 

Dunzo has raised around $457 Mn across multiple funding rounds till date and counts Google, Lightrock, Reliance Retail, Lightbox, and Alteria Capital among its investors. The startup, which raised $240 Mn from Reliance Retail in January 2022, seems to have burned all the cash, as its FY23 financials and the recent financial challenges suggest. 

Over the past few months, the startup has been in the news for all the wrong reasons. Besides the exit of its cofounder Dalvir Suri, Dunzo has been rocked by several strikes from its delivery executives demanding better pay, shut down of its dark stores, and cash crunch. The startup has been in talks to raise $100 Mn from investors for over half a year now but has managed to raise a mere $45 Mn in debt. 

Despite its ongoing struggles and the astronomical increase in its loss, Dunzo, in a statement, presented a rosy picture.

“For Dunzo, this year was about growing sustainably by strengthening our core businesses. Overall platform GMV crossed INR 1,500 Cr, representing the true scale of our business. Crucially, our business burn is now neutral as we successfully implemented cost cuts and more importantly revamped our store network for Dunzo Daily, moving from a dark store model to a partner store model,” a company spokesperson said.