Exclusive: Reliance Retail Writes Off $200 Mn Dunzo Investment

Reliance Retail, the largest shareholder in troubled hyperlocal startup Dunzo, has written off its $200 Mn investment in the company, multiple sources privy to developments told Inc42. 

Reliance is also not involved in any talks to infuse funds into Dunzo or acquiring it in a distress sale after the company’s cash crunch and retreat from quick commerce in the past 24 months.

Meanwhile, Dunzo cofounder and CEO Kabeer Biswas according to our sources is leading talks with high net worth individuals and family offices for an acquisition deal that would value the startup at INR 300 Cr ($25 Mn-$30 Mn).

“Reliance has assured Biswas that they will be supporting him to salvage Dunzo. But they are not interested in buying Dunzo. They had made a buyout offer 2-3 years ago offering to buy the hyperlocal startup at a near unicorn valuation, which Biswas declined. But after quick commerce startups entered the industry and Dunzo’s inability to scale beyond a few cities, Reliance had absolutely no interest in Dunzo,” one of the sources quoted above said.

Notably, Reliance Retail senior executives Ashwin Khagiwala and Rajendra Kamath had stepped down from Dunzo’s board along with the representatives of other investors including Lightrock and Lightbox in 2023.

If the company is acquired for the reported price of $30 Mn, it would be a staggering discount on the $770 Mn valuation commanded by Dunzo during its last funding round, when Reliance infused the funds. 

Biswas has reportedly also held talks with Flipkart, Swiggy, Tata Group and Zomato for a buyout, but has failed to secure any success. 

Queries sent to Reliance Retail and Biswas did not elicit any response at the time of publishing this story. The story will be updated as and when they respond.

Sources added that although Dunzo is still operational in parts of Bengaluru, it has shut down in other cities. Currently, the company is sticking to its older model of connecting local retailers to online consumers. 

Earlier this week, it was reported that Biswas is close to quitting the company and has communicated his decision to investors. The CEO intends to step out after seeing through any potential acquisition deal.

How Reliance’s Biggest Startup Investment Tanked

In January 2022, Dunzo raised a $240 Mn funding round in which Reliance Retail invested $200 Mn. This was Reliance Retail’s largest investment in the Indian startup ecosystem. 

The other notable investments from Reliance Industries include the INR 1,340 Cr deal to acquire edtech startup Embibe, as well as the acquisitions of Clovia (INR 950 Cr) and NetMeds (INR 620 Cr).

At the time, it was seen as something of a strategic investment. Dunzo and Reliance intended to enter into partnerships, where the former would enable hyperlocal logistics for Reliance’s retail store network as well as JioMart. 

While Dunzo had survived the hyperlocal boom and busy cycle of 2015, by 2022, the game had changed. Quick commerce was well and truly in fashion and Dunzo’s model was feeling antiquated. While the startup launched Dunzo Daily to compete with Blinkit, Instamart and Zepto, it just couldn’t scale it beyond Bengaluru, Mumbai and Delhi. 

In hindsight, it’s clear that the $240 Mn infusion was not enough to tap the quick commerce opportunity, but the rapid rise of Zepto had created a third challenger in the race against Zomato’s Blinkit and Swiggy-owned Instamart. Dunzo was just not able to capitalise on this opportunity like Zepto did. 

Given Dunzo’s problems, Reliance Retail is looking to explore the quick commerce opportunity with JioMart. And for the past two years, Dunzo’s cash situation has worsened, leading to severe cutbacks, a lengthy list of dues to vendors as well as the exit of founders and key leaders. 

Dunzo saw its losses widen over 3X to INR 1,801 Cr in FY23 from INR 464 Cr in the preceding fiscal. The financial turmoil caused delays in salary payments for both current and former employees, as well as outstanding dues to vendors.

The startup did secure $6.2 Mn in debt funding and shifted focus from 15-20 minute deliveries to 60-minute deliveries to cut down costs.

However, Dunzo’s total debt including those of its vendors and outstanding tax as per sources could be in the range of INR 80 Cr which Biswas hopes to clear if the company manages to get a buyout deal.

[Edited By Nikhil Subramaniam]