Dunzo in more trouble: Facebook serves notices over unpaid dues
Dunzo's troubles see no end. It was only yesterday the quick commerce start-up deferred the salaries of its staffers to September. It seems the company's cash crunch has affected other payments too. It has been served legal notices by Facebook India Online Services Private Limited (FBI) and Nilenso, a Bengaluru-based software consultancy firm, over unpaid dues, per Moneycontrol.
Why does this story matter?
Dunzo has been one of the major players in India's quick commerce segment. However, the start-up has been struggling over the past few months as the hype surrounding superfast delivery has died down. The cash-strapped company has been dealing with heavy losses and a high burn rate, affecting its quest for profitability. The legal notices add to Dunzo's woes.
Dunzo owes Rs. 1.5 crore to Facebook
Dunzo's liability toward Facebook stems from availing the latter's advertising service. The company made partial payments to the tech giant but it still owes Rs. 1.5 crore. Payment made by Dunzo "was insufficient to settle all the outstanding balances under the account," the legal notice reads. Dunzo's account was suspended by FBI after it failed to provide a payment plan.
Nilenso sent notice under Insolvency and Bankruptcy Code
Nilenso's notice to Dunzo is under the Insolvency and Bankruptcy Code (IBC). The former supplies software engineers on contract. Dunzo has paid the firm Rs. 1 crore but it owes around Rs. 2.5 crore. On top of the two legal notices, Google, Dunzo's second-largest shareholder, has also sent the start-up a notice over unpaid dues.
Dunzo is expected to fire around 200 employees
Dunzo's cash crunch is real. The start-up has $40 million in the bank, good for 18 months of runway. However, it can't access the money due to debt obligations. To cut costs, the company has decided to axe more employees. Nearly 200 employees are expected to be affected. This will be Dunzo's third round of job cuts. It has already fired 380 staffers.
Company is pivoting to B2B model to cut costs
The start-up had raised $75 million in April, but it is still struggling. It says a lot about Dunzo's burn rate. The company is now in talks with Reliance, its largest shareholder, to raise around $20 million. It has also closed about 70% of its storage facilities to cut costs. The company is now pivoting from its current model to B2B.
