Dunzo, a delivery platform based in India, is reportedly in talks with its largest shareholder, Reliance Retail, to secure an additional $20 million (approximately Rs 165 crore) in funding. This comes after Dunzo fell short of its $75 million funding target in April. Reliance Retail acquired a 25.8% stake in Dunzo in January 2022 by investing $240 million, while Google holds just under 20% of the shares. Read More Business News on our website.
If the ongoing discussions are successful, Reliance Retail’s ownership in Dunzo is expected to increase as they consider making an additional investment. The company has been facing financial challenges, leading to workforce reductions and a shift in its business model. In January, Dunzo laid off 3% of its employees and reduced its dark store count by 50% in an effort to achieve profitability.
In April, Dunzo raised $75 million through convertible notes but had to lay off another 30% of its staff. CEO Kabeer Biswas mentioned the need to “revamp” the business model. The company has focused on its business-to-business (B2B) unit, Dunzo Merchant Services (DMS), which relies heavily on Reliance Retail’s JioMart ecommerce arm as a major contributor. By prioritizing the B2B segment, Dunzo aims to achieve profitability with lower capital requirements compared to its Dunzo Daily service.
DMS handles over 30,000 orders per day, primarily for last-mile delivery services, in seven cities. Despite initially planning to expand DMS to 15 cities, Dunzo has now canceled those plans. DMS generates approximately 35% of Dunzo’s revenues and serves over 25,000 merchants, mostly in the food industry. The company earns revenue through commissions from merchants and delivery fees from platform users.
Presently, Dunzo employs around 1,000 people, but recent reports indicate that the company has deferred the June salaries of around 500 employees, accounting for half of its workforce. Salaries exceeding Rs 75,000 have been delayed. While Dunzo has sufficient capital to sustain operations for approximately 8-10 months, it aims to aggressively cut costs to extend its cash runway.
However, it remains uncertain whether Reliance Retail has provided a definitive answer regarding the additional investment, and Dunzo is currently unable to approach other strategic investors due to Reliance’s involvement.