While home-grown startup Dunzo is usually accustomed to making a delivery of some nature, this time they’re on the receiving end of a legal notice from at least seven companies since March this year, according to multiple media reports. These are Google India, Nilenso, Clover Ventures, Facebook India Online Services Private Limited, Cupshup, Koo, and Glance.
While earlier estimates put Dunzo’s dues in the ballpark of Rs. 5-6 crore, sources now peg Dunzo’s outstanding vendor debts at approximately Rs 11.4 crore. Clover Ventures, an agritech startup, recently demanded that Dunzo clear dues that have now totalled over Rs. 2 crore, while advertising company Cupshup sent a legal notice for a demand of Rs. 1 crore owed for services rendered. The report, published on Moneycontrol, has Cupshup sources saying that Dunzo had promised the money on multiple occasions in the past, but no payment was ever made.
“The outstanding amount is substantial and owing to the delay in payments, my client has suffered severe financial hardships. My client is also responsible for the livelihood of its employees and hence cannot keep waiting for the payments,” Cupshup’s legal notice was quoted as saying.
The problems and legal notices are piling up for Dunzo, which was also served a legal notice by Facebook India Online Services Private Limited (FBI) and Bengaluru-based software consultancy firm Nilenso over unpaid dues of Rs. 4 crore. “Dunzo defaulted in making its payments to FBI under the Contract, despite repeated efforts, verbally and in writing, to rectify the delinquency, Dunzo acknowledged its liabilities and started making the payment to FBI. However, the payment was insufficient to settle all the outstanding balances under the account,” the legal notice read, which was accessed by Moneycontrol.
Google India, Dunzo’s second-largest investor after Reliance Retail, also joined in with a legal notice requiring the startup to pay Rs. 3.1 crore for services provided.
“Google has made numerous requests to Dunzo Digital for payment of an outstanding principal balance due and owing Google in the amount of (Rs) 2,88,31,760.16. However, said amount remains unpaid”, said a legal notice sent by the tech giant’s legal firm..
Also throwing their hat in the ring for dues to be paid are lock-screen platform Glance, which sent a notice demanding payment of Rs, 58 lakh for services availed, and Koo, the indigenous microblogging platform. Koo had subleased office space from Dunzo earlier
this year and vacated the space, but are yet to receive a refund of its security deposit of over Rs. 62 lakh, which led to them sending a legal notice as well.
“Despite our client vacating and handing over the vacant possession of the demised premises to you on March 31, 2023, you have failed to refund the security deposit back after deducting certain amounts, and thereby breached the terms of the Agreement,” a legal team representing Koo was quoted as saying.
Dunzo’s woes have also impacted its employees adversely, with the company announcing a third round of layoffs, which impacted around 150-200 employees in July 2023 as the company battles a severe cash crunch. Salaries of employees have been deferred too, with the company deciding to postpone 50% of the salary for certain employees at manager-level positions and above, as per media reports. The company, however, missed the last deadline due in July and delayed the salaries of several employees to September 4 as it seeks to raise more money and sort out its cash flow issues. Meanwhile, several employees at the company have alleged that Dunzo hasn’t filed tax deducted at source (TDS) for their employees for the last 6 months.
While the company is yet to disclose its financials for FY23, it recorded Rs. 54.3 crore in revenue from operations in FY22 as against Rs. 25.1 crore in FY21. As per Fintrackr, the company’s losses also deepened at a similar pace to Rs. 464 crore in FY22 against Rs. 229 crore in the previous year.
With India’s funding winter showing no signs of thawing, Dunzo’s struggles show no signs of letting up. Of the $75 million that it raised in April, only approx. $45 million has materialised, and the company is now seeking to raise $20 million more from Reliance Retail. In an effort to pare back, the quick commerce player has shuttered as much as 70% of its dark stores, with some sources saying that Dunzo Daily has been permanently shut, and it’s only the logistics and B2B arm of the company that’s currently operational. Time will tell if the companies desperate bid for survival will bear fruit.
