Tata Digital Eyes Dunzo Stake To Continue Super App March

After investing in Curefit and 1mg, and acquiring BigBasket, Tata Digital, the digital services business of the Tata Group conglomerate, is said to be in talks with hyperlocal services and delivery startup Dunzo for a potential investment and controlling stake.

The speculated deal could value Dunzo at $150-200 Mn, but Dunzo has denied the reports, claiming that it had raised funds at a significantly higher valuation in 2020.

In September last year, the Bengaluru-based startup raised $28 Mn in its Series E funding round led by global tech giant Google and investment firm Lightstone. The company’s existing investors Lightbox, 3 L Capital, Moving Capital, Pivot Ventures and Bhoruka Finance Corporation also participated in that round.

Following this, earlier this year, Dunzo secured INR 60 Cr funding from 10 investors — Hana Financial Investment, BHK Trading LLP, Willett Advisors LLC’s Binu J George, Chowdry Associates, Hans Tung, NPTK Emerging Asia Fund I, DS Spiceco Private Limited, Dharampal Satyapal.

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

In the financial year 2020, Dunzo reported operating revenue of INR 27.5 Cr, with expenses spiking 2.13X to INR 359.5 Cr. The company reported a loss of INR 228.4 Cr for the fiscal year ending in March 2020.

Responding to the speculated Tata group investment and potential acquisition, a Dunzo spokesperson told Mint, “We’re very surprised by the buyout question, which is not up for discussion at all. That being said, we want to highlight: Dunzo has doubled as a business in the last 75 days and processes over $200 Mn in annualized gross merchandise (GMV) value.”

The company added, “Dunzo’s last round in CY20 (calendar year 2020) was at a significantly higher valuation than the numbers you’ve mentioned.”

Dunzo cofounder Biswas had claimed in April last year that it has a repeat user rate of 80% and a transaction frequency of five orders per month per user. “We need 15 Mn -17 Mn transactions on a monthly basis to get profitable on a company level, which is nearly 1.3% of the total business. The market that we are chasing is big enough, economics that you need to run the company are at a market share or market penetration that is significantly smaller than the size of the market,” Biswas had said in April, in the early days of the lockdown in 2020.

In recent months, the company has pivoted to a micro-fulfillment centre (MFC) model to deliver orders as quickly as 20 minutes. The company plans to deploy 250 MFCs to serve more than 700 neighbourhoods with the top 1,500 SKUs from local merchants. It plans to expand MFC operations to 20 cities by 2022. Will Dunzo prove to be the centrepiece in the Tata super app plan, linking its various ecommerce operations?

In the case of medicine delivery alone, since January 2021, Dunzo has witnessed a growth of 350%, while consumables like groceries, fresh produce, and daily staples have grown 318% as of April 2021. Between March and May this year, Dunzo claims to have delivered over 20,000 orders to hospitals. Further, the delivery of home-cooked meals and medical aid drove the 204% growth in Dunzo’s ‘pick up and drop’ orders or the courier service.