Dunzo Takes Convertible Notes Route For Funding, In Talks To Raise $100 Mn

SUMMARY

The fresh capital will be used to expand the Reliance Retail-backed startup’s quick commerce service Dunzo Daily

The startup was initially looking to raise around $150 Mn, however, it is unlikely to cross the $100 Mn mark in the round

Abu Dhabi Investment Authority is likely to join the round, while Dunzo is also looking to onboard one or two more external investors

Hyperlocal delivery platform Dunzo is reportedly in talks to raise up to $100 Mn (INR 825 Cr) through convertible notes.

The fresh capital will be used to expand its quick commerce service Dunzo Daily, ET reported.

The discussions are in advanced stages and the round might close in the range of $70-$100 Mn, as per the report.

The Reliance Retail-backed startup was initially looking to raise at least $150 Mn by selling a stake. “It will settle closer to $100 million but definitely not anywhere closer to $150 million,” a source was quoted as saying.

Since last year, many late stage startups such as Udaan have raised funds through convertible notes amid the ongoing funding winter. Raising funds through convertible notes as opposed to an equity round allows the company to delay placing a value on itself.

Dunzo’s largest investor Reliance Retail is likely to write a relatively smaller cheque in this round than last time. Besides, sovereign wealth fund Abu Dhabi Investment Authority (ADIA), which is an investor in Reliance’s Jio Platforms, is also likely to join the round. Dunzo is also trying to onboard one or two more external investors for the round.

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

The Bengaluru-based startup raised $240 Mn in a fresh round of investment led by Reliance Retail Ventures Limited last year. The retail subsidiary of Mukesh Ambani-led Reliance Group picked up a 25.8% stake on a fully diluted basis in Dunzo for $200 Mn, pushing the startup’s valuation to $775 Mn.

It must be noted that Dunzo also shut down a few dark stores across cities in November last year to optimise cost.
“We shut down a few stores in peripheral areas with very low demand to drive operational efficiencies and optimise costs,” a Dunzo Spokesperson said.

Dunzo’s consolidated loss rose 2X to INR 464 Cr in the financial year 2021-22 (FY22) from INR 229 Cr in the prior fiscal year as its expenses doubled. The startup’s operating revenue increased 2.1X to INR 54.3 Cr in FY22 from INR 25.1 Cr in FY21.

India’s quick commerce market was estimated to be worth $30 Mn market in 2021 and is expected to grow 15X to $5 Bn in 2025, according to Redseer. Dunzo competes with the likes of Zepto, Swiggy Instamart, and Blinkit in the crowded quick commerce space where almost all the players are struggling to find a path to profitability.

The funding winter has further increased the pressure on the startups to turn profitable. Indian startups raised $25 Bn in funding in 2022, a decline of 40% from $42 Bn in 2021, according to Inc42’s ‘Annual Indian Startup Funding Report 2022’.