Udaan is strategically streamlining its operations to reduce expenses in response to the challenging liquidity market conditions. By focusing on specific categories and embracing a market cluster strategy, the company is refining its approach for better efficiency and sustainability.
M&G Prudential, a renowned savings and investment company in the UK, is reportedly in discussions to spearhead a fresh investment cycle amounting to $80-100 million for Udaan, a Bengaluru-headquartered business-to-business (B2B) ecommerce enterprise, according to sources familiar with the matter as reported by ET.
When the new funding round is finalized, the UK-based company’s ownership stake in Udaan will increase from its current level of approximately 15%, as per sources familiar with the matter. Following Lightspeed Venture Partners, holding a stake of around 40%, M&G Prudential stands as the company’s second-largest shareholder.
Sources have indicated that Udaan, which experienced a 44% decrease in its valuation to approximately $1.8 billion last year, could potentially secure its latest funding round at the same reduced valuation. They have confirmed the signing of a term-sheet and are currently ironing out the specifics of the deal.
According to a source familiar with the matter, the term sheet has been finalized with potential funding reaching approximately $100 million, subject to the participation of additional significant investors. Moreover, discussions are underway with various family offices.
“A term sheet represents a preliminary proposal to make an investment in a company following a thorough evaluation process, though it is not legally binding.
Vaibhav Gupta, the CEO of Udaan, chose not to provide a comment. An email inquiry directed to M&G Prudential went unanswered as of the press deadline on Tuesday.
Udaan is gearing up for its initial significant round of equity funding following its capital raise in 2021. The funding round in December 2023, amounting to $340 million, mainly involved the conversion of debt to equity. Throughout the past 7-8 quarters, the company has been dedicated to reducing operational expenses and executing its revamped strategies under Gupta’s leadership.
Sources have revealed that Udaan, despite its debt restructuring in late 2021, still carries approximately $100 million in debt, with extended payment deadlines.
Since 2021, Udaan’s CEO, Gupta, has been downsizing operations to reduce expenses in a challenging financial market. Back in 2016, Gupta, along with his former colleagues from Flipkart, Sujeet Kumar and Amod Malviya, founded the company. Although Kumar and Malviya have been distant from the company’s day-to-day activities for over two years, they still maintain their positions on the board.
According to an individual knowledgeable about the figures, the current estimated net merchandise value run-rate of Udaan stands at approximately $600-700 million, signifying a significant decrease from previous values. Another source familiar with developments within Udaan mentioned that despite a noticeable decline in scale, the company has been focusing on improving Ebitda margins. Reportedly, they are experiencing a monthly business growth rate of 4-6%.
The company has shifted its attention to specific categories and adopted a cluster strategy for the markets it serves. Bengaluru and Hyderabad have emerged as its primary markets, with surrounding towns also receiving its services within these urban clusters.
One individual mentioned earlier highlighted that the primary areas of focus include groceries, fresh produce, staples, FMCG, and dairy, with some growth observed in pharmaceuticals and general merchandise.
A source familiar with the fundraising discussions explained that the objective is to achieve profitability in Ebitda. This fundraising round is aimed at reaching that goal and fortifying the financial position of the company.
According to sources familiar with the company’s plans, Udaan’s holding company, Trustroot Internet, is currently based in Singapore. The company is contemplating relocating its domicile to India in preparation for a potential initial public offering (IPO) in the future. Despite these intentions, insiders suggest that any IPO is unlikely to take place for at least another two years.
In Udaan’s financial report for FY23 in Singapore, the company’s reduced operational scope is evident. The figures reveal a noteworthy 43% decline in gross revenue, amounting to Rs 5,629 crore for the fiscal year ending in March 2023. Despite this, the company managed to decrease its losses from Rs 3,123 crore in FY22 to Rs 2,075 crore. As of now, the FY24 financial results are pending submission to the Singaporean regulatory bodies.
In January, it was reported by ET that Udaan, along with other Indian startups, have deliberated on relocating their headquarters back to India.
