NCLT Admits Velvin Packaging Solutions’ Insolvency Plea Against Dunzo

Adding to the mounting troubles of Dunzo, the National Company Law Tribunal (NCLT) has admitted Velvin Packaging Solutions Private Limited’s insolvency plea against the quick commerce startup.

As per details available on the NCLT website, Velvin Group, a leading Indian manufacturer of sustainable packaging solutions, filed the plea in November last year. The plea was registered earlier this month.

It is pertinent to note that Dunzo has received multiple legal notices from its vendors for payment of outstanding dues amidst its struggles to continue its operations due to a severe cash crunch.

Last year, the startup received legal notices from Google India, Nilenso, Clover Ventures, Facebook India Online Services Private Limited (FBI), Cupshup, Koo and Glance for the same. Dunzo’s outstanding dues to these vendors stand at around INR 11.4 Cr.

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. Its foray into the quick commerce space with Dunzo Daily led to a sharp increase in its cash burn.

Dunzo faced challenges in scaling its business, particularly when compared to quick commerce giants such as Blinkit, Zepto, and Swiggy Instamart. While it is now focussing only on the less capital intensive B2B operations, it is far from a major player in this space, where it competes with the likes of Porter, Shiprocket, as well as Zomato and Ola.

Dunzo has raised around $457 Mn across multiple funding rounds so far. It counts Reliance, Google, Lightbox, Lightrock, and Alteria Capital as its investors. The startup raised $240 Mn from Reliance Retail in January 2022.

Dunzo’s struggles over the last year or so due to cash crunch have resulted in it undertaking multiple rounds of layoffs and also halting employee salary payments for months. The startup also saw exit of some of its key board members and cofounder Dalvir Suri last year.

Amid all these, Flipkart is reportedly exploring acquiring the cash-starved startup. However, complexities around Dunzo’s ownership structure has made it difficult for both parties to reach a deal.

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. While its operating revenue increased 317% to INR 226.6 Cr in FY23 from INR 54.3 Cr in FY22, total expenses ballooned 286% to INR 2,054.4 Cr in FY23.