Dunzo Seems To Announce Debit Restructuring Plan Amid Legal Notices And Layoff Series!

From financial issues to mass layoffs and a significant decline in revenue, the crisis for Reliance Retail-backed quick-commerce firm Dunzo appears to be worsening. According to people familiar with the issue, the financially stressed quick commerce startup Dunzo has held talks with its debt investors to restructure the terms of the credit so that the company can use some of its cash sitting in the bank to clear pending vendor dues and staff salary arrears stretching back two months. The discussions to settle new arrangements, including repayment dates, have been ongoing. Dunzo’s efforts come when the company is seeking more funding from existing and new investors.

Whom does Dunzo need to clear the pending dues?

Google India, Nilenso, Clover Ventures, Facebook India Online Services Private Limited (FBI), Cupshup, Koo, and Glance have all issued legal notifications to the quick-commerce firm. Overall, Dunzo’s outstanding vendor debts amount to around Rs 11.4 crore, roughly double the previously projected Rs 5-6 crore.

• Facebook India Online Services Private Limited (“FBI”) and Nilenso, a software consultant in Bengaluru, have sent the quick-commerce firm legal notices for non-payment of dues totalling around Rs 4 crore. Nilenso is owed the greater portion. 
• Google India, the firm’s second-largest investor after Reliance Retail, has filed a court letter demanding that the firm pay the internet giant Rs 3.1 crore for different services rendered.
• Clover Ventures, an agri-tech business that distributes fruits and vegetables, demanded payment of almost Rs 2 crore in dues on July 19.
• Similarly, Cupshup, an advertising business, filed Dunzo with a court letter demanding that the quick-commerce company pay Cupshup Rs 1 crore for the services.
• Glance, the lock-screen platform filed a notice demanding that Dunzo pay Rs 58 lakh for the services the Bengaluru-based startup used.
• Koo, the microblogging service, subleased office space from Dunzo and vacated it early this year but has yet to receive a refund of the security deposit of Rs 62 lakh.

Dunzo’s attempt to seek a lifeline through debt restructuring is an outcome of postponing wages and anticipating further layoffs.

Dunzo has cut expenditures by 30-40%, resulting in additional job layoffs and significant salary delays. Employees raised concerns to high management after learning that the payment of June salary arrears and July pay would not be made until early September. The business had set a limit of Rs 75,000 for June wage payments and pledged to pay the arrears on July 20.

Layoffs at Dunzo.

1. Reliance Retail-backed Dunzo laid off about 3% of its employees in January 2023. This was the first round of layoffs. While the firm did not reveal the true number of people who lost their job, people in the know said the firm axed around 60-80 employees.
2. In the second round in April, the Bengaluru-based startup fired 30% of its employees, impacting around 300 jobs. The company had taken this move to ensure profitability in the next 18 months.
3. On July 21, Dunzo publicly informed its employees of the third round of layoffs, which would affect around 150-200 people. 

The Bengaluru-based company currently only runs roughly seven dark stores, all of which are in Bengaluru, as opposed to about 150 until at least the middle of last year.

The services are also impacted by the scale shift. For instance, certain high-density locations in downtown Bengaluru do not provide “instant delivery,” which takes between 20 and 35 minutes; instead, customers choose the “no rush” option, which might take between 75 and 90 minutes.

Dunzo’s loss: from rising star to falling ship? 

Last year, it was evident that Dunzo’s massive push to become an ultra-fast grocery delivery platform, fighting against bigger rivals like Swiggy’s Instamart, Zomato’s Blinkit, and Zepto, had failed. Soon after, the company began modifying its business model, indicating that its unit economics for grocery delivery in 19 minutes (its product promise) were not working.

Worryingly, the market has become hesitant to invest in startups, let alone in a cash-hungry industry like fast commerce. This was the point at which Dunzo decided to put a halt to its expansion aspirations, whether for Dunzo Daily or its business-to-business product Dunzo Merchant Services (DMS).

Unlike other e-commerce companies, the quick-commerce firm had limited funds and needed to invest in and expand the enterprise to obtain more funds. Pausing the growth helped, but just little. Given the limited resources and financial winter, it was abundantly evident by the end of 2022 that Dunzo Daily couldn’t operate even at its reduced scale.

Conclusion.

Due to their unwillingness to invest time and resources in projects that won’t have a direct impact right now, startups are closing. Amid tech winter has arrived, investors are now very cautious in giving funds; hence, most Indian startups are facing troubles now.