Quick commerce unicorn Dunzo has reportedly engaged in discussions with its debt investors to restructure the terms of its credit. This move follows the company’s ongoing struggles with cash flow challenges, leading to delayed payments to vendors and salary arrears for staff spanning two months.
Pending Dues and Legal Notices
The delay in vendor payments has attracted legal notices from at least seven companies, including tech giants Google and Facebook, over unsettled dues.
Talks to Finalize New Terms
According to a report by ET, the talks between Dunzo and its debt investors aim to finalize new terms, which encompass aspects like payment timelines and agreements.
Dunzo Pursuit of Funding and Current Situation
In addition to restructuring discussions, Dunzo has been actively seeking funding from both new and existing investors. Despite having funds within the company, obligations tied to debt and cash flow complexities have added intricacies to the situation, according to sources cited in the report.
Dunzo Response and Shifting Strategies
While Dunzo denied the report on debt restructuring, the company’s spokesperson emphasized its business efficiency with a balanced mix of debt and equity. The spokesperson also indicated that Dunzo’s business achieved a positive contribution margin without revealing specific details.
Amidst these developments, Dunzo has integrated its B2B logistics arm, Dunzo For Business (D4B), with the Indian government-backed Open Network for Digital Commerce (ONDC). However, Dunzo’s direct-to-consumer operations under Dunzo Daily have faced a decline in transactions compared to its peak performance last June.
To adapt, the startup has returned to its earlier business model, shifting from owning dark stores to collaborating with partner stores based on a revenue-sharing model. Additionally, the startup is reportedly contemplating layoffs, with the possibility of around 200 job cuts.
This situation echoes a trend among Indian startups that turned to debt financing during the funding challenges. Companies like BYJU’S and Reshamandi have encountered difficulties with debt restructuring due to cash flow constraints, emphasizing the broader impact of such financial strategies.
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