Dunzo’s Dilemma, Crucial Survival In The Shadows Of Shifting Investments Amid Financial Crisis And Reliance Holds All The Cards

The fate of Dunzo, once a promising player in the quick commerce space, hangs in the balance as it grapples with harsh financial crises. The company's largest investor, Reliance Retail, remains reluctant to commit to a proposed rights issue, leaving Dunzo urgently in need of funds. In the midst of these challenges, the startup faces a downward spiral in valuation, internal leadership shifts, and a stark decline in operational scale.

Dunzo’s prospects for survival are teetering on the edge due to the lack of commitment from its major investor, Reliance Retail, regarding a proposed rights issue, according to sources familiar with the matter.


The fast-paced commerce startup is in dire need of funds and is grappling to meet even minimal staffing expenses; despite numerous rounds of discussions, an impasse has emerged, leaving other investors of Dunzo increasingly doubtful about the company’s ability to endure without a prompt infusion of fresh capital, as disclosed by several individuals briefed on the situation.

Dunzo’s CEO, Kabeer Biswas, has been diligently working to orchestrate a new financing round for several months; however, the pivotal involvement and approval for the cash injection from Reliance Retail, owned by Mukesh Ambani, remains crucial.

Reliance Retail Doing A U-Turn?
Sources reveal that discussions between Reliance Retail and Dunzo have reached an impasse, creating a sense of urgency for capital infusion; this despite Reliance’s ownership stake of at least 26%, there is no indication yet that the company will invest.

However, it has been reported that Biswas, a co-founder, is simultaneously exploring alternative avenues for capital, although these efforts have yet to yield positive results.

Dunzo is currently grappling with outstanding payments to former employees and vendors. A report on October 10 highlighted that all significant payments from the company are under review by the board and investors, including Reliance Retail.


The Valuation Game
The impending down round, marked by a reduced valuation from the previous funding round, is causing concern among investors, particularly Reliance, which injected $200 million in January 2022.

According to an insider, there have been disagreements between Biswas and Reliance regarding the extent of the cut in Dunzo’s valuations for the new financing round.

Despite Biswas assuring other investors of a committed arrangement, there is a growing sense of despair. The fate of Dunzo, which was last valued at nearly $800 million in January 2022, will be clarified in the coming weeks.

However, recent reports suggest a potential crash in valuation to $200 million, signifying substantial erosion in value for Reliance Retail, which made the largest investment in the last funding round; before Reliance’s investment, Dunzo was valued at approximately $300 million.

Lower Orders
As Dunzo grapples to sustain its operations, there has been a notable decline in the scale of both its consumer vertical and business-to-business (B2B) arm, Dunzo Merchant Services.

Order volumes, which once exceeded 5 million monthly orders at its peak last year, have now dwindled to below one million. The company is adopting higher delivery pricing strategies with pick-up and drop, as well as third-party grocery services, potentially diverting traffic to competitors.

The Story So Far
The current team at Dunzo is operating with a bare minimum staff compared to its previous scale, reflecting the challenges the company faces daily.

Job cuts have been prevalent throughout 2023, and Biswas committed to investors that Dunzo would have no more than 200 employees; however, this could change if new capital doesn’t materialize in time.

In the midst of financial constraints, Dunzo has informed employees that November salaries will be deposited “in a few days” based on the “assurance” from investors as it strives to secure a more substantial funding round.

Despite entering into a partnership with OneTap, a revenue financing firm earlier this year, the company grapples with a severe fund shortage and is actively pursuing fundraising in the range of $25-30 million, anticipating a notable decrease in valuation.

Having garnered nearly $500 million in funding since 2015 from notable investors like Reliance, Google, Lightrock, Lightbox, Blume Ventures, among others, Dunzo is reportedly navigating operating expense management and has been deferring salaries since July.

In a bid to address cash flow challenges, the company relinquished its office space, and key executives, including two co-founder have departed; still adding to its woes, Dunzo faces legal notices from vendors for non-payment.

The situation escalated in November when Dunzo’s auditor, Deloitte, expressed reservations about the company’s ability to sustain itself, appended to regulatory filings for FY23 that unveiled a staggering 288% surge in losses, reaching Rs 1,802 crore.

A significant imbalance between current liabilities and assets, coupled with high operational costs and material uncertainty, led Deloitte to cast doubt on Dunzo’s viability as a going concern.

Financial troubles have compounded, with FY23 expenses skyrocketing fourfold to Rs 2,054 crore.

Despite a 320% increase in revenues from Rs 54 crore in FY22 to Rs 226 crore in FY23, Dunzo’s substantial advertising spend of Rs 310 crore, up from Rs 64 crore in FY22, yielded only marginal revenue growth.

Employee benefit expenses surged to Rs 338 crore, a 144% increase from Rs 138 crore in FY22.

Presently seeking a fund infusion to address immediate salary concerns until the closure of an equity round in January, Dunzo’s challenges mirror broader uncertainties within the quick-commerce sector.

The company’s struggle indicates the industry-wide quest for sustainability amid intense competition and evolving market dynamics.

Reliance Holds All The Cards
Reliance holds a strategic position as an investor, and even if other investors express a willingness to contribute capital, they expect Reliance to take the lead or at least participate.

Hence, without Reliance’s involvement, there is uncertainty about whether the infusion of survival funds will yield any positive outcome.

Facing ongoing challenges, one of Dunzo’s co-founders, Dalvir Suri, has exited the beleaguered startup, as initially reported on October 2. Mukund Jha, another co-founder who serves as the chief technology officer, has also discussed an exit plan; however, Ankur Agarwal remains as the fourth co-founder.

The Current Challenging Trend In Startups
Dunzo’s current predicament shares similarities with the challenges faced by edtech firm Byju’s, although the latter’s significance, impact, and scale are more extensive.

In a report on December 5, it was revealed that Byju Raveendran, the founder of Byju’s, had to borrow Rs 5 crore to clear pending salaries for November, marking a critical red flag that the company is in a genuine crisis, according to an observer closely tracking both companies.

The startup sector has witnessed a trend of rationalization in soaring valuations – for instance, PharmEasy had to raise new capital through a rights issue at a 90% discount to its peak 2021 valuation of $5.6 billion, using the funds to address part of its debt to Goldman Sachs.

The Last Bit, Dunzo’s journey from a valuation high of nearly $800 million in January 2022 to a potential crash at $200 million are indicative of the gravity of its financial woes.

The impasse with Reliance Retail, coupled with widening losses and strategic exits of key cofounders, paints a challenging picture for the once-prominent quick commerce startup.

As the startup sector witnesses a trend of valuation rationalization, Dunzo’s plight echoes broader uncertainties in the startup ecosystem.

The coming weeks will be critical for Dunzo, determining whether it can secure the crucial funding needed to revive its operations or succumb to the harsh realities of financial distress.



Writing is not just a pastime for me; it's a calling! There is something about the power of words - they can move people, inspire change, and bring about new ideas. With nearly 15 years of experience in the corporate sector, I have understood the therapeutic value of writing, using it as a means to explore my thoughts and articulate my views on various topics. Being passionate about writing, I strive to create content that informs and enriches the lives of my readers. I am grateful for the time they spend reading my work and aim to make every word count.

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