Dunzo says will hit profitability in 12 months, has reduced costs

Auditor Deloitte has expressed doubt about on-demand delivery platform's ability to continue as a going concern

Dunzo, the on-demand delivery platform, said on Wednesday its business burn is neutral after cost cuts and it will achieve "corporate-level profitability" in 12 months.

“There’s a lot to be excited about - from our growing presence on the ONDC network, our strong logistics business, to the new avatar of Dunzo Daily,” said the company in a statement, referring to the open e-commerce network launched by the government and the company’s store network. “We aim to hit corporate-level profitability in 12 months."

Dunzo, which is backed by Google and Reliance, gave the statement after its auditor Deloitte expressed doubt over the firm’s ability to continue as a going concern. Deloitte’s comments were appended with Dunzo’s regulatory filings which showed that the delivery company’s losses in FY23 increased by 288 per cent to Rs 1,802 crore. It had incurred Rs 464 crore in losses in the previous year.

 

Deloitte said that Dunzo’s liabilities exceeded its current assets by Rs 325.8 crore because of high operational costs for building a customer base. As Dunzo’s liabilities amount to more than its total assets, the company will be unable to repay its creditors.

Dunzo’s ability to continue as a going concern is dependent on the availability of additional funding and improving business operations. “These events or conditions, along with other matters…indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern,” said Deloitte.

Dunzo said Deloitte’s audit report was filed six months ago and the firm has since then improved business and funding. The company’s overall platform gross merchandise value crossed Rs 1500 crore in FY23. “Crucially, our business burn is now neutral as we successfully implemented cost cuts and more importantly optimised our store network for Dunzo Daily, moving to a hybrid model,” said the company.

The company said its logistics and business-to-business vertical are generating strong revenue. “It is growing by over 128 per cent while becoming GM neutral,” said Dunzo.

Auditors had flagged similar issues around Dunzo being a going concern in FY22. However, since then the challenges for the firm have grown significantly. Over the past several months, Dunzo has laid off over hundreds of employees, shut dark stores and held back salaries. It has also given up its office space to control its cash burn.

In FY23, Dunzo’s expenses increased four times to Rs 2,054 crore, largely led by advertising spending. In FY22, its expenses were Rs 532 crore.

Dunzo’s revenue from operations increased 4.1X to Rs 226 crore in FY23 from Rs 54 crore in FY22.

Five members have reportedly exited Dunzo’s board. These include cofounders Dalvir Suri and Mukund Jha, as well as representatives of investors Reliance Retail and Lightrock.

Dunzo has raised $498 million from investors such as Google, Reliance, Alteria Capital and Lightrock India.