Dunzo Digital Private Ltd., a Google-backed distribution start-up with operations in eight Indian cities, plans to raise twice the amount of capital it has raised so far in the next two years, to expand its scope across the country and become a $1 billion revenue firm.
The app, which links low-cost couriers with thousands of individual merchants, has enticed Indians with its lightning-fast delivery of groceries and parcels in congested cities. The Bengaluru-based company has raised approximately $140 million to date, and plans to raise another $150 million in 2021.
In an interview, Kabeer Biswas, Dunzo’s 36-year-old chief executive officer, said, “The expansion only really begins next year at full speed, so we’ll boost the capital this year, but it gets deployed only next year.” He believes the business will grow to two more cities in 2021, with a goal of having a presence in 20 cities by mid-2023. It has also begun providing 15-minute delivery for a selection of 2,000 popular products.
Dunzo began as a WhatsApp service in 2014 before evolving into an app where customers usually pay about $6 per order.
It’s capitalising on rising Internet penetration and connectivity in India, where tech and market start-ups are thriving as the country’s smartphone population approaches one billion. According to Jefferies, e-commerce has been the fastest growing outlet for fast-moving consumer goods in recent years, accounting for around 5% of all such transactions.
As the second wave of infections sweeps India, Covid-19 has fueled competition for Dunzo and other food delivery services. Swiggy, a food-delivery app, announced on Monday, that it is raising $800 million to capitalise on the trend.
According to Jefferies analysts, including Vivek Maheshwari, the growing imposition of state-level restrictions “is a negative development for consumption in general,” but web-based retail would likely get a “boost.”
Dunzo’s annual revenue doubled in 2020, according to Biswas, and the company expects the same increase this year. According to him, Dunzo’s largest operation in Bengaluru is now profitable.
Biswas expects Dunzo to become profitable in 24 to 30 months, despite the fact that the business is burning up to $2.5 million every month. In 2023, it could also look to grow in other Asian markets, he said.
“You make 20 cents per order; scale is the only way to make this business work,” he explained. “It’s crucial to be extremely disciplined in your geographic expansion, because you might suddenly start losing money everywhere,” says the author.
