Flipkart In Talks To Acquire Cash-Strapped Dunzo

SUMMARY

Complexities around Reliance-backed Dunzo’s ownership structure has made it difficult for both parties to reach a deal

While the talks between Flipkart and Dunzo are ongoing, the ecommerce giant is sceptical about what all it will be able to take over through the acquisition

Dunzo has been struggling due to a cash crunch for almost a year, which has resulted in layoffs and delays in salary payments

Walmart-backed ecommerce major Flipkart is reportedly exploring acquiring cash-starved hyperlocal delivery startup Dunzo.

As per a TechCrunch report, complexities around Reliance-backed Dunzo’s ownership structure has made it difficult for both parties to reach a deal.

It is pertinent to note that Dunzo has been struggling due to a cash crunch for almost a year now. This has resulted in the startup undertaking multiple rounds of layoffs and also halting employee salary payments for months. The startup also saw the resignations of some of its key board members and cofounder Dalvir Suri last year.

As per the report, the acquisition talks between Flipkart and Dunzo are still ongoing. However, the deal is yet to materialise also because Flipkart is sceptical about what all it would be able to take over through the acquisition.

Dunzo has several IP relationships with Reliance Retail. The Reliance Group company is also the largest investor in Dunzo and has reportedly not approved the deal.

Emails sent to Dunzo and Flipkart did not immediately elicit a response. The story will be updated on receiving responses from them.

As per the report, Flipkart sees value in certain assets of Dunzo, including the hyperlocal delivery firm’s business-to-business offerings.

Founded in 2015 by Kabeer Biswas, Suri, Mukund Jha, and Ankur Aggarwal, Dunzo connects consumers with nearby stores and facilitates deliveries of products including groceries, medicines, and food, among other daily needs. Though the startup forayed into quick commerce space with Dunzo Daily, it only resulted in more cash burn for the company.

In fact, the startup’s biggest round from Reliance Retail in January 2022 was to fuel its quick commerce operations, along with bolstering its B2B business.

However, its business has struggled to scale in comparison to the quick commerce majors including Blinkit, Zepto, and Swiggy Instamart. Even on the B2B front, Dunzo faced heavy competition from Porter, Shiprocket, as well as Zomato and Ola.

Dunzo has raised around $457 Mn across multiple funding rounds so far. Besides Reliance, it also counts Google, Lightbox, Lightrock, and Alteria Capital on its cap table.

Amid the ongoing troubles, Dunzo’s loss almost quadrupled year-on-year (YoY) to INR 1,801 Cr in FY23. Operating revenue stood at INR 226.6 Cr during the year, growing 317% YoY.

Meanwhile, there were also reports recently that Walmart-backed fintech major PhonePe, which separated from Flipkart in 2022, was exploring an investment in Dunzo.