B2B e-commerce firm Udaan raises $120 million in convertible debt

Udaan

Udaan, the business-to-business (B2B) e-commerce startup backed by Lightspeed Venture Partners, has raised $120 million in convertible debt from existing financiers, chief financial officer Aditya Pande said in an email to employees.

With this round, Udaan has raised more than $350 million through convertible notes and debt in the past four quarters, making it one of the largest structured instrument fundraises in the country, Pande said in the email, a copy of which Moneycontrol reviewed.

The names of the investors were not disclosed in the email. The company’s existing financiers include Microsoft, Lightspeed India Partners and GGV Capital.

The Bengaluru-based company founded by former Flipkart executives Amod Malviya, Vaibhav Gupta, and Sujeet Kumar in 2016 is an e-commerce platform designed for small businesses.

Udaan has over 3 million registered users and 25,000-30,000 sellers across 900+ cities, according to the company’s website. The platform has over 1.7 million retailers, chemists, kirana shops, hotels/restaurants/caterers, and farmers carrying out over 4.5 million transactions a month.

Udaan raised $200 million in convertible notes and was valued at about $3.1 billion in January. In September last year, the company said Vaibhav Gupta had been appointed as CEO in line with plans to become a publicly listed company. Before Gupta’s appointment, the cofounders had divvied up the responsibilities.

Path to IPO

“Despite the funding-related challenges being experienced by the larger startup ecosystem, this fundraising reflects the confidence of investors in our business model,” Pandey said in the letter.

The investors will have the option to convert the debt notes to equity before the company opens its initial public offering. Udaan said it is preparing for an IPO.

“We are getting ready to go public in the next 12-18 months… Our unit economics improved by ~1,000 bps with equally strong improvements in both gross margins and operating cost and the journey of the right business design and unit economics has translated into a 60 percent-plus reduction in the burn,” Pandey added.

Startups including unicorns valued at over $1 billion are opting for debt amid tight venture equity funding in India. 

In August, digital payment solutions provider MobiKwik raised debt of Rs 35 crore from Blacksoil Capital following a delay in launching its IPO. Recently, cloud-kitchen unicorn Rebel Foods raised Rs 75 crore in venture debt from Alteria Capital.

Udaan laid off about 180 employees, which is about 4-5 percent of the workforce, according to people aware of the developments. The company had about 4,000 employees before the layoffs.

Udaan’s consolidated revenue shot up sixfold to Rs 5,919 crore in FY21 from Rs 978 crore in FY20, according to reports on Entrackr. Udaan still burns about $12 million a month on transactions, a person with knowledge of the matter said.