Dunzo served legal notices by Facebook, Nilenso over unpaid dues of Rs 4 cr

As it looks to clear its dues and better its financial health, Dunzo, which is faced with a severe cash crunch, will also be laying off employees.

Quick-commerce player Dunzo has been served a legal notice by Facebook India Online Services Private Limited ("FBI") and Nilenso, a software consultancy firm, based out of Bengaluru, over non-payment of dues, Moneycontrol has learnt.

These developments come at a time when Google, Dunzo’s second-largest backer, has also issued a legal notice to Dunzo asking the startup to clear unpaid dues.

Dunzo has made part payments to Facebook but still owes about Rs 1.5 crore to the tech giant, people in the know told Moneycontrol. Dunzo had availed Facebook’s advertising services but did not pay the entire amount for the same.

“...Dunzo defaulted in making its payments to FBI under the Contract, despite repeated efforts, verbally and in writing, to rectify the delinquency, Dunzo acknowledged its liabilities and started making the payment to FBI. However, the payment was insufficient to settle all the outstanding balances under the account,” the legal notice read.

In total, the demand notices would not amount to more than Rs 5-6 crore for the startup, a person aware of the developments said.

Dunzo has so raised close to $500 million since its inception in 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.

“...FBI appropriated another attempt by sending a follow up email and make a few calls on the lookout for payment status or payment plan ("Plan”) for entire outstanding. However, Dunzo failed to provide the plan, thus, the account remains suspended,” the notice dated March 17, 2023 said while adding that Dunzo had agreed to pay FBI's dues within 30 days from the date of invoices raised by FBI.

Facebook and Dunzo did not immediately reply to Moneycontrol’s queries. The story will be updated if they respond.

More troubles

While Dunzo was still dealing with Facebook, people aware of the developments at the startup told Moneycontrol that Nilenso, which provides software engineers on contract, has also sent a demand notice under the Insolvency and Bankruptcy Code (IBC) to Dunzo for the payment of outstanding dues.

The Bengaluru-based cooperative is still owed around Rs 2.5 crore, after paying roughly Rs 1 crore from its total outstanding, one of the persons cited above said.

Nilenso did not immediately reply to Moneycontrol’s emails but a person aware to the developments confirmed that there is a pending litigation between Nilenso and Dunzo.

As it looks to clear its dues and better its financial health, Dunzo, which is faced with a severe cash crunch, will also be laying off employees, Moneycontrol had reported on July 19.

This will be the company’s third round of layoffs within the last seven months, with the company having its back to the wall as it faces mounting troubles, thanks to issues surrounding cashflow.

Senior employees estimated that at least 20 percent of the company’s workforce — approximately 200 employees — will be affected. So far, 380 employees have already been let go by the company in two rounds of layoffs.

In June, Dunzo deferred salaries for around 50 percent of its workforce — roughly 500 employees — with the promise that dues would be cleared by July 20. That deadline was however missed. Due to the cash crunch, the company had also capped the salaries of employees at Rs 75,000 in June, no matter how much higher than this their salary is. Everyone below the threshold was to get paid in full.

"We understand this is very difficult for you and we appreciate your patience. At this stage, we need to focus on streamlining our cash flow so we can build a more sustainable business for the future. We need your support as we work through this," the email sent to employees read.

Dunzo had raised $75 million in April, but continues to struggle — a clear indicator of its high burn rate.

The company has continued to juggle measures to stay afloat. It has looked at sourcing products through a marketplace model after it reportedly shut over 50 percent of its dark stores, along with exiting unprofitable markets. Additionally, it has increased its delivery fees, started delaying deliveries and is also levying convenience fees on users to earn more on each order.

Founded in 2015, 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.

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