Udaan, a Bengaluru-based B2B e-commerce platform, is struggling at the operational level with its scale. The revenues have flattened for the fiscal year 2024. Valuation that had touched a peak of $3.2 billion has declined more than 59% and now stands at $1.3 billion. Despite this, the company has managed to cut losses down to more than 19% during the same fiscal period.
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The gross merchandise value (GMV) of Udaan has witnessed a mild increase of 1.7% and stood at ₹5,706.6 crore during FY24 in contrast to ₹5,609.3 crore during FY23. However, this figure contrasts starkly with FY22, wherein the GMV of Udaan was significantly high, at ₹9,900 crore, portraying the story of how the firm could not regain the old pace.
Udaan earns revenues from the trade sale of goods, which offer payment for access to their platform and provides logistics, credit, and display advertising. The largest share contributor remains sales of traded goods at 98.5 percent share of the total GMV. The business has also earned some income from scrap sale from returned goods. The fee for processing disbursals for loan through the capital arm has also contributed to income.
Even though revenues remained flat, Udaan saw more material costs that comprised 75.3% of the total expense. Material cost rose 4.2% to ₹5,576.8 crore, forcing the company to bring down other expenses. Here, Udaan could cut employee benefits by 35.4%, logistics and packaging costs by 16.8%, outsourced manpower expenses by 39.3%, and legal and professional fees by 18.8%. Hence, Udaan’s expense in FY24 stood at ₹7,407.6 crore – down 4.4% from ₹7,750.8 crore in FY23.
The losses for the company were pegged at ₹1,674.1 crore in FY24, after narrowing down to ₹2,075.9 crore in FY23. On the flip side, Udaan’s operating cash flow for the period surged up 28.8% to ₹-920.5 crore. This strengthens the EBITDA margin, improving 576 basis points to -37.13%, and indicates a positive trend in operational efficiency, though it still reflects a loss at the unit level since Udaan spends ₹1.3 to earn every rupee of operating revenue.
This notwithstanding, stagnating revenue growth at Udaan has investors in a sweat. Thin margins, concomitant to the very nature of the B2B e-commerce business, require company like Udaan to convert funded growth into actual profitability-a challenge many firms within the sector face currently.
Udaan received debt funding worth ₹300 crore or over $35 million from investors Lighthouse Canton, Stride Ventures, InnoVen Capital and Trifecta Capital after running into financial trouble. At present, the company managed to raise about $1.9 billion through funding in both debt and equity. Meanwhile, the valuation of Udaan is plummeting with each passing hour, so it urgently needs this extra funding.
Going ahead, tough decisions lie in store for Udaan in the complexities it now finds itself in. However, effective management of loss through these cost-cutting measures presents a heavy risk on the growth side from revenue expansion. The strategic choices that the firm makes going forward in the coming months will be what will sustain its operations and investor confidence. The path to recovery and scaling operations at Udaan is full of challenges, calling for careful navigation and decisive action.
