Udaan, the Bengaluru-based business-to-business (B2B) ecommerce firm, is actively pursuing a new funding round expected to generate between $80 million to $100 million. The investment, primarily led by the UK savings and investment firm M&G Prudential, could enhance their ownership stake in Udaan from approximately 15% to a greater share. This potential funding comes amidst a period of significant operational scaling back for Udaan, as they adjust to a tightening liquidity market and shift their strategic focus.
The latest funding discussions follow Udaan’s recent valuation dip of 44%, which brought its worth to about $1.8 billion. Despite the challenging fundraising environment, insiders say that the company may close this round at the same valuation level, as a term-sheet has already been signed. This term-sheet is essentially a non-binding agreement indicating that a commitment to invest is on the table, pending due diligence.
Vaibhav Gupta, Udaan’s CEO, has refrained from public comments regarding the funding details. However, he has been known to spearhead efforts to cut operational costs over the past 7 to 8 quarters, while simultaneously restructuring the company’s approach to markets and product offerings. This will be Udaan’s first major equity funding event since it raised capital in 2021 amidst a turbulent market landscape.
Significantly, Udaan’s last substantial funding injection, a $340 million round in December 2023, largely involved converting debt into equity, a telling sign of their financial strategies in a strained economic climate. It remains that Udaan continues to sit with around $100 million in outstanding debt, a situation that has pushed repayment timelines farther into the future. These financial maneuvers underline the company’s urgent need to stabilize its funding sources as it navigates its path ahead.
Udaan also seems to be refining its operational focus, zeroing in on select market areas. Its recent strategy shifts have embraced a “cluster approach,” concentrating services around major metropolitan areas like Bengaluru and Hyderabad. The emphasis lies on categories deemed more essential or resilient, such as grocery, fresh produce, staples, fast-moving consumer goods (FMCG), and dairy products. The inclusion of pharma and general merchandise indicates a careful consideration of market demands, hoping to improve financial performance and yield profitability.
Financially, Udaan’s trajectory has been visibly impacted, a reality represented in their FY23 financial statement from Singapore, reporting a 43% decline in gross revenue, totaling Rs 5,629 crore. The company’s efforts have not been in vain, as losses were curtailed from Rs 3,123 crore in FY22 down to Rs 2,075 crore, indicating a slight, yet important, progression in their financial restructuring. The net merchandise value run-rate currently sits around $600 million to $700 million, but this is considerably less than previous figures the company boasted before restructuring.
Looking ahead, Udaan has plans for an initial public offering (IPO), with aims to re-domicile in India, moving from its current setup in Singapore. However, estimates suggest that any IPO is still a minimum of two years away, and the focus will remain squarely on improving their operational efficiency and returning to stronger revenue figures that could allure investors.
The application of new strategies not only reflects a response to market pressures but also a dedication to building a more robust, resilient foundation for future growth. This upcoming funding round holds critical importance, not just for financial bolstering, but also as a means to position Udaan firmly back in the competitive landscape of India’s vibrant B2B e-commerce sector.
As Udaan continues adjusting its operational strategies, its commitment to operational efficiency and profitability will be paramount as it seeks to engage current and potential stakeholders through this funding round.