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According to Moneycontrol, Facebook India Online Services Private Limited (“FBI”) and Nilenso, a software consultancy company with offices in Bengaluru, have served Dunzo, a player in quick-commerce, with a legal notice for failing to pay dues.
These developments come as Google, Dunzo’s second-largest sponsor, has also sent the business a legal letter requesting that it pay back outstanding debts. According to persons in the know who spoke to Moneycontrol, Dunzo has made partial payments to Facebook but still owes the internet giant around Rs 1.5 crore. Although Dunzo used Facebook’s advertising services, he did not pay the full cost.
“Dunzo failed to make the required payments to the FBI in accordance with the Contract despite repeated verbal and written attempts to correct the situation. Dunzo later admitted its faults and began paying the required payments to the FBI. However, the payment was inadequate to pay off all the account’s outstanding amounts, according to the legal notification. According to a person with knowledge of the circumstances, the company would not get demand notifications totaling more than Rs 5–6 crore.
“…FBI made another try by writing a follow-up email and making a few calls in an effort to find out the status of any payments or to create a payment plan (“Plan”) for the whole amount owed. The account is still stopped since Dunzo did not offer the plan, according to a notification dated March 17, 2023, which also said that Dunzo had pledged to pay FBI’s dues within 30 days of the date of FBI’s invoices.
Moneycontrol contacted Facebook and Dunzo, but neither responded right away. If they answer, the narrative will be updated.
Even more issues
The firm Nilenso, which supplies software engineers on contract, has also given Dunzo a demand notice under the Insolvency and Bankruptcy Code (IBC) for the payment of overdue dues, according to sources with knowledge of the startup’s activities who spoke to Moneycontrol when Dunzo was still negotiating with Facebook.
After paying around Rs 1 crore of its total outstanding debt, the cooperative with headquarters in Bengaluru is still owing nearly Rs 2.5 crore, according to one of those individuals. Moneycontrol emailed Nilenso, who did not immediately respond, but a person familiar with the circumstances stated that Nilenso and Dunzo are currently engaged in legal proceedings.
Dunzo, which is under a severe cash constraint, will be laying off staff members as it attempts to pay its debts and improve its financial situation, according to a July 19 article from Moneycontrol. This will be the third round of layoffs for the firm in the past seven months, and it is in dire straits due to cash flow problems that are forcing it to its knees. At least 200 workers, or 20 percent of the total workforce, are expected to be impacted, according to senior staff. In two rounds of layoffs, the business has already fired 380 people.
With the assurance that the company’s debts would be paid in full by July 20th, Dunzo postponed wages for about 500 of its employees, or about 50% of its staff, in June. Nevertheless, the deadline was passed. The corporation also set a wage ceiling for workers in June at Rs. 75,000 due to a financial shortage, regardless of how much higher their actual earnings are. The whole amount was to be paid to everyone who fell below the cutoff.
“We are grateful for your patience and recognise how tough this is for you. In order to create a more long-term, sustainable firm, we must now concentrate on optimising our financial flow. According to the email sent to staff, “We need your help as we work through this.
Dunzo received $75 million in April, but the company is still having trouble, which is a blatant sign of a high burn rate. The firm is still juggling many strategies to survive. Following the closure of almost 50% of its dark shops and the exit of unproductive areas, it allegedly considered procuring items using a marketplace approach. In order to maximise the amount it receives from each purchase, it has also raised its delivery prices, begun delaying deliveries, and began charging convenience fees to consumers.
Since its founding in 2015, Dunzo has raised close to $500 million from Reliance, Google, Lightrock, Lightbox, Blume Ventures, and a number of other investors. According to Tracxn, Google was the second-biggest stakeholder in Dunzo with a stake of about 19%, while Reliance held the highest position with a 25.8 percent ownership in the business. The Network18 organisation includes Moneycontrol. Independent Media Trust, whose sole beneficiary is Reliance Industries, is the entity in charge of controlling Network18.
