Udaan bounces back after Covid-19 doldrums; in talks to raise $150-200 mn

The year 2020 posed one of the biggest leadership tests for three friends and former Flipkart executives, Amod Malviya, Sujeet Kumar, and Vaibhav Gupta, who founded Udaan, a business-to-business e-commerce start-up in 2016.
 

After raising $585 million from marquee investors in October 2019 and gaining recognition as India’s fastest-growing unicorn, Udaan’s business model found itself severely disrupted by the coronavirus pandemic.
 

At one stage during the lockdown, the Bengaluru-based firm is learnt to have lost almost 60 per cent of its business. It had to lay off 10-15 per cent of its contract staff, leading to the loss of around 3,000-3,500 jobs. But the founders and their team have been able to pull Udaan out of the carnage. Udaan is once again growing rapidly, more so because Covid-19 has accelerated the shift to e-commerce.
 

Thanks to the growing demand, the company is now in talks to raise about $150 million-$200 million from existing investors, including Lightspeed Venture Partners, DST Global, Tencent, Altimeter, Footpath Ventures, Hillhouse, GGV Capital, and Citi Ventures, to scale up its operations. After last year’s financing round, Udaan’s valuation was at $2.8 billion. “Udaan’s business has recovered and it is now in the process of raising fresh funds,” said an industry expert.
 

The company did not respond to an email query till the time of going to press, however.
 

Udaan has products across categories such as lifestyle, electronics, home and kitchen. The other categories are staples, fruit and vegetables, fast-moving consumer goods, pharma, toys and general merchandise.
 

The platform has over 500,000 products curated across 2,500 national and regional brands. It has partnerships with leading brands such as HUL, P&G and ITC. The other brands include Coca Cola, Reckitt Benckiser, Colgate, Apple and LG, which are leveraging Udaan’s strong distribution network to reach over three million retailers with an everyday delivery cycle spread over 900 cities and more than 12,000 pin codes.
 

The lack of a strong and reliable logistics network often results in a significant percentage of products being wasted. Udaan is addressing this gap. It is able to provide its partner FMCG companies with direct and easy access to millions of kiranas and retailers.
 

Today, the transaction volume of Udaan’s foods business comprising FMCG, staples and fresh products has crossed 8,000 tonnes per day. This makes Udaan the largest grocery platform in the country. The volume is greater than the daily food consumption of countries such as Singapore, Denmark, Finland and Norway.
 

The foods business is, in fact, the company’s biggest success story. It grew over 500 per cent in volume in the last two years and the number of buyers went up by over 50 per cent in only the last six months.
 

On an average, Udaan receives over three million orders a month in the food category across 50 cities, and delivers over 150,000 orders daily, spread over all business verticals. It has over 1.5 million kirana shops, HoReCa (hotels, restaurants and cafés) and farmers, who place orders and supply food products.
 

The booming online retail sales this year showed that smaller cities and rural areas of the country are now a key market for e-commerce companies. These markets are not far behind metro and tier-1 cities in terms of consumption. Udaan’s founders Malviya, Kumar, and Gupta, who are all IIT engineers, had identified these opportunities long ago. They themselves hail from small towns in the states of Uttar Pradesh and Bihar, where, growing up, they had to travel to the nearest big city for large purchases.

 

An alumnus of IIT-Kharagpur, Malviya was the chief technology officer of Flipkart before he quit the firm in 2015. He is considered to be the one who built Flipkart’s technology backbone. Kumar, an alumnus of IIT-Delhi, played a key role in building the supply chain at Flipkart. And Gupta, who is also an alumnus of IIT-Delhi, was senior vice-president for business finance and analytics at Flipkart in 2015.
 

All three wanted to start a company that would have an impact on a large number of people, and where technology could play a disruptive role. The aim was to solve the problems of small businesses, especially in “Bharat”, or smaller towns and rural areas, using technology. The founders then decided to build a large-scale e-commerce distribution platform, which would be based on mobile, internet and e-commerce technology.
 

Udaan has built inclusive tech tools for Bharat. They cater specially to the needs of brands, retailers and manufacturers, providing them with a level playing field to scale, trade and grow their business. For example, analysing real-time marketing feedback through app data analytics is enabling brands and manufacturers to make well-informed decisions about product launches and the testing of new products in different markets. Its app-based pricing system gives better pricing control, too. Moreover, the product listing advertisements and in-app advertisements encourage manufacturers to reach their targeted, ready-to-purchase retailers on the platform.
 

Then there is UdaanExpress, which enables logistics focused on B2B trade. UdaanCapital, the company’s non-banking financial company, is focused on small and medium enterprise financing services, and provides financial products to sellers and buyers to grow their businesses.