Dunzo Aims for Profitability Despite Auditor’s Concerns

Introduction

Dunzo, the on-demand delivery platform, has announced its efforts to achieve corporate-level profitability within the next 12 months. This comes after its auditor, Deloitte, expressed doubts about the company’s ability to continue as a going concern due to substantial losses in FY23. Despite these challenges, Dunzo is making strategic moves to address its financial health.

Dunzo’s Statement

In a statement, Dunzo highlighted its growing presence on the ONDC (Open Network for Digital Commerce) network, a strong logistics business, and the launch of “Dunzo Daily,” indicating its commitment to achieving corporate-level profitability within a year.

Financial Challenges

Dunzo’s FY23 losses increased by a staggering 288 percent, reaching Rs 1,802 crore, up from Rs 464 crore in the previous year. Deloitte cited the company’s high operational costs for building a customer base as the primary reason for these escalating losses. The liabilities exceeded the current assets by Rs 325.8 crore, creating uncertainty about the company’s ability to repay its creditors.

Dunzo’s Going Concern Status

Deloitte expressed concerns about Dunzo’s ability to continue as a going concern, given the gap between liabilities and assets. They suggested that the company’s future viability depends on securing additional funding and improving its business operations.

Dunzo’s Response

Dunzo clarified that Deloitte’s audit report was filed six months ago and that the company has made significant improvements since then. The platform’s gross merchandise value crossed Rs 1500 crore in FY23, and the company claimed that its business burn is now neutral. They successfully implemented cost-cutting measures and optimized their store network for Dunzo Daily.

Business Segments and Revenue

Dunzo pointed out that its logistics and business-to-business verticals are generating strong revenue growth. The business has been growing by over 128 percent while becoming gross merchandise neutral, indicating a shift towards financial sustainability.

Auditor’s Previous Concerns

This isn’t the first time Deloitte has raised concerns about Dunzo’s status as a going concern. Similar issues were flagged in FY22. However, the challenges faced by the company have since escalated. Over the past several months, Dunzo has taken drastic measures to control its cash burn, including laying off hundreds of employees, closing dark stores, and holding back salaries.

Financial Performance

In FY23, Dunzo’s expenses increased fourfold to Rs 2,054 crore, largely driven by substantial advertising spending. In FY22, the company’s expenses were significantly lower at Rs 532 crore. Despite these challenges, Dunzo reported a remarkable increase in revenue from operations, reaching Rs 226 crore in FY23 from just Rs 54 crore in FY22.

Changes in Board and Investors

Five members, including co-founders Dalvir Suri and Mukund Jha, as well as representatives of investors like Reliance Retail and Lightrock, have reportedly exited Dunzo’s board. This indicates a reshuffling of leadership and stakeholder involvement within the company.

Funding History

Dunzo has secured a total of $498 million in funding from notable investors such as Google, Reliance, Alteria Capital, and Lightrock India. This funding history suggests significant backing and interest in the company’s potential.

Conclusion

Despite significant financial challenges and concerns from its auditor, Dunzo remains determined to achieve corporate-level profitability within the next 12 months. The company’s strategic initiatives, cost-cutting measures, and optimization of its business segments demonstrate its commitment to financial sustainability in a competitive on-demand delivery market.