Dunzo eyes up to $300m to fund fast trade

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Mumbai: Hyperlocal delivery startup Dunzo Digital Pvt Ltd, backed by Reliance Retail Ventures and Google, is planning to raise $250-300 million to help with its expansion plans, co-founder Kabeer Biswas said in an interview.

Dunzo will likely work with Morgan Stanley on fundraising, the process of which could begin in April.

According to Biswas, the company expects to dilute around 10-15% of its shares during this cycle. However, he did not disclose any valuation figures given the volatile state of the market. “In the previous round, we didn’t optimize for valuation. We optimized for the right partner,” Biswas said, noting that the company had received other offers valuing Dunzo at over $1.2 billion as well. at this moment.

Eventually, Dunzo raised $240 million from Reliance Retail Ventures Ltd and other investors such as Lightbox, Lightrock and others, in a deal that also included a secondary sale of shares, at a market valuation. “conservative” post-money of $800 million earlier in January 2022. “I think valuations are resetting as we speak,” Biswas said, adding that he expects markets stabilize over the next few months, after which Dunzo will come to market to raise capital.

Reliance Retail acquired a 25.4% stake in January. Other Dunzo shareholders include Google, while Dunzo’s co-founders and management team own around 20% of the company. The company has approximately $200 million in the bank in the form of cash reserves. It plans to do another pre-IPO round — possibly a $500 million round — before going public in 2024, Biswas said.

Dunzo was previously planning an IPO in 2023, but it’s still giving its fast-paced trading business some time to mature before going public.

The fast trade category is building over the next two to three years, Biswas said, and businesses have to choose whether they want to be part of it or not.

“There’s a macroeconomic shift happening where consumers want to bring their daily and weekly staple shopping to a much more convenient way. The best way to achieve this with the best unit economics is to deploy dark stores. We have deployed it in three cities: Bangalore, Chennai and Pune. We are rolling out dark stores in Mumbai next week and will be rolling out our dark stores in the National Capital Region a week later,” he said. About 25 dark Dunzo stores will go live in Mumbai next week, Biswas said.

The company aims for a delivery time of 15 to 20 minutes for its orders. “Nearly 85% of our orders are delivered within 15 minutes,” Biswas said. He added, “I don’t understand how this 10-minute delivery works. Even before this rage started (the 10-minute rage), we were delivering within 22 minutes or half an hour. We’ve been consistent on the fact that there doesn’t seem to be too much of a difference in retention between 10 minutes and 20 minutes. And 20 minutes is what we’re indexing,” he said.

Dunzo is currently achieving an annual rate of 1,500 crore ($197 million) for its current gross margin value (GMV) is around 1,500 crore ($197.3 million). The business realized a gross market value of 1,000 crore from January to December 2021. “We would like to reach a gross goods value of around $2.5 billion before going public,” Biswas said.

Dunzo currently handles around 200,000 orders a day, around half of which are served by its dark stores or warehouses, which form the backbone of its fast commercial delivery service.

Dunzo is also planning to add new verticals for items that its Quick Trade business can supply. It is exploring ways to provide drugs and alcohol subject to licensing requirements. He also expects giving to become a key area of ​​growth. “Gifts can include flowers or books…there are several categories of gifts that people want to send quickly. Given the size of the market, we also expect basic electronics and accessories stores are getting dark. India also has a lot of festivals – so the selection of those we hope will appear in our stores,” Biswas said. He expects advertising to be a source of revenue key in the future.

In addition to its fast commerce business, which is the company’s focus for the next 18 months, the company also has a courier and peer-to-peer delivery business, which serves both business users and consumer users. It has 75,000 delivery frames for this vertical. It also offers a network of other retail stores, such as Nature’s Basket on its app, for the convenience of customers. Both the courier business and the marketplace make money on a unit economy business, Biswas said. The company did not reveal its exact revenue numbers. But Biswas said Dunzo is currently burning around $7-8 million a month. This burn rate is expected to decline, once its current expansion plan achieves its goals. It expects to reach profitability closer to 2024, before going public, Biswas said.

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