RIL arm, other backers to throw lifeline to quick commerce firm Dunzo

$35 mn fundraise may go through within a week

Beleaguered quick commerce company Dunzo is in talks to raise around $35 million in fresh funding amid an ongoing liquidity crunch at the firm.

The deal is expected to go through within a week, according to sources.

The capital will primarily be raised from the company’s existing investors like Reliance Retail, who will pump in the funds on favourable terms. Some new investors will also participate in the funding round, people aware of the development told Business Standard.

The fresh funds will be raised on a pro rata basis, proportional to the stake the investors have in the company. The valuation is, however, still undecided.

The Bengaluru-based firm has raised around $500 million in funding since its inception from the likes of Reliance — its largest investor with a 25.6 per cent share, and Google — its second-largest backer with around 19 per cent stake, according to data from Tracxn, a market intelligence platform. Other notable investors of Dunzo include Blume Ventures, Lightrock, Lightbox, and Alteria Capital, among others.

Dunzo has been looking to raise capital for several months but has not been able to do so yet. This is because of disagreements in the company’s valuation.

Queries sent to Dunzo did not elicit any response.

The current funding talks have come as a breather for the cash-strapped startup, which has been deferring the salaries of its employees over the last few months.

The firm had deferred the June and July salaries of over 50 per cent of its workforce of 1,000 to the first week of September. It also capped employee salaries at Rs 75,000, irrespective of their pay package. This month, Dunzo once again postponed employee salaries for August-October, before extending them to November yet again.

The funding will be used primarily for salary payouts and to meet pressing working capital requirements.

To cut costs, Dunzo will reportedly switch its business model to solely focus on partner stores, shutting down its dark stores. It was previously operating via a hybrid marketplace business model, “which is a combination of dark stores and partner stores.”

The startup is also looking to move out of its headquarters at Wind Tunnel road (Bengaluru) as further cost-cutting measures.

The delivery platform had, in April this year, laid off around 30 per cent of its workforce or about 300 workers. Dunzo had previously let go of 3 per cent of its workforce — around 80 workers — in January.

In FY22, Dunzo’s revenue stood at Rs 54.3 crore, up from Rs 25.1 crore in the previous year, according to filings with the ministry of corporate affairs. The company’s loss, on the other hand, jumped two-fold to Rs 464 crore in FY22 against Rs 229.1 crore in FY21.

Mounting woes

• Dunzo deferred salaries of over 50% of its workforce till September and this month to November  
• It is looking to move out of its headquarters as part of a cost-cutting measure
• In April, the firm laid off about 300 workers or 30% of its workforce 
• The company saw five of its seven dark stores in Bengaluru halt their operations