Dunzo further delays salary payments to October as funding talks make little progress

Dunzo co-founder and CEO Kabeer Biswas

Dunzo, the startup that is reeling under severe cash crunch, has told former employees that it will be further delaying salaries to the first week of October as it has not been able to raise the capital it was expecting to get from investors.

The startup was earlier scheduled to clear all dues on September 4, it told former employees in an email on August 30. Moneycontrol has seen a copy of the email.

“We sincerely apologize for this delay. Ensuring that you receive your due compensation as early as possible is our top priority. Please be assured that we are doing everything to make this happen, and we are confident that there will be no further delays after this,” the email read.

The October deadline is Dunzo's second extension now. When it had first decided to cap salaries on July 3, it promised to clear all dues by July 20. After failing to make payments in July, it set a new deadline of September 4 and, as an incentive, it even promised to pay interest on the salary component that was held back.

Dunzo, which is based in Bengaluru, is now asking former staffers to wait for another 30 days to receive the held-back portion salaries.

“Please note that pending salaries for the months of June and July, due to be paid on September 4, will be paid in the first week of October. You will receive the salary dues along with a 12 percent p.a. interest, which will now be calculated for an additional month," the email sent on August 30, added.

Sliver of hope

While Dunzo was buying more time from its former employees, it sent another email to its current employees and gave them something to cheer about. All the employees who are still working with Dunzo will receive their August salaries on September 4, as promised.

"You will receive your salary for the month of August 2023 on time on September 4. The balance salaries for June and July, along with an interest of 12% p.a., will be cleared at the earliest. We will revert with the exact date next week," the email said. Moneycontrol has seen a copy of the email.

The company did not specify a timeline on when the held-back portion of June and July salaries will be cleared in full.

It provided more assurance to them and said "you can also expect salary payments from September month onwards to be regularised. We sincerely apologize for this delay," the email added.

The commitment was likely because Dunzo was expecting funds to come through sometime in September. "We have made positive progress on funding and aim to close procedural requirements in September. In the meantime, we wanted to clear August salaries as per the committed timeline. We are confident that there will be no further delays..." Dunzo said in the email to current employees.

How it got here

It all started on July 3, when Dunzo deferred salaries and capped pay packages at Rs 75,000 per month per employee affecting over 500 employees. It had, however, assured employees that all dues would be cleared by July 20, a deadline that the startup missed.

After the July deadline, Dunzo’s top management – including co-founder and CTO Mukund Jha – held a call with employees and assured them that the startup “will definitely” clear all dues by September 4 and even pay employees an interest of 12 percent per annum on the portion of salaries that were held back.

For instance, an employee who was earning Rs 1 lakh a month but was paid only Rs 75,000, because of Dunzo’s decision, in June will now receive an interest of 12 percent per annum on the remaining Rs 25,000.

Jha had earlier said the revised deadline provides the company “a more than enough buffer” because talks with investors were looking “positive” but the company seems to have made no progress on that front yet. Jha had earlier told employees in a townhall that Dunzo had not raised an equity round in the past as the valuations were not in the company's favour.

In between all this, Dunzo has also been slapped with legal notices from over seven companies and vendors that amount to over Rs 11 crore, Moneycontrol had reported earlier. In an attempt to cut costs, Dunzo has already undertaken three rounds of layoffs over the past year eliminating over 500 jobs, across three rounds of layoffs in just eight months.

Along with the job cuts, the company has also shut most of its dark stores and has been operating a marketplace model. Under the new arrangement, which was put in place about six months ago, Dunzo picks up products from supermarkets and delivers them to customers directly, instead of fulfilling orders from its own dark stores.

As a result, Dunzo’s dark store count has reduced from 120 to just seven, Moneycontrol had reported. The company had said the unit economics work out better under the marketplace model.

Dunzo has so far raised close to $500 million since 2015 from Reliance, Google, Lightrock, Lightbox, Blume Ventures and several others. Reliance is the largest shareholder with a 25.8 percent stake in the company, and Google was the second-largest with around 19 percent ownership in Dunzo, according to Tracxn, a private markets data provider.

Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.