Flipkart in talks to potentially acquire Reliance-backed startup Dunzo

Despite having raised approximately $500 million to date, Dunzo has faced increased competition in the hyperlocal delivery segment

Indian e-commerce giant Flipkart has engaged in discussions in recent weeks regarding a potential acquisition of Dunzo, the hyperlocal delivery startup backed by Reliance Retail. However, complexities surrounding Dunzo's ownership structure have posed challenges in reaching an acquisition deal, according to a report by TechCrunch. The talks are reportedly still ongoing, with both parties still in negotiations.

This potential acquisition comes in the wake of a challenging period for Dunzo, which has faced difficulties in securing funding and meeting staff payroll obligations. Despite having raised approximately $500 million to date, Dunzo has faced increased competition from emerging players such as Zepto, Swiggy, and Zomato's BlinkIt in the hyperlocal delivery segment.

Flipkart, valued at over $32 billion, acknowledged the potential value in certain aspects of Dunzo's business, particularly its business-to-business offerings. However, the Walmart subsidiary remains cautious about the assets it would inherit in acquiring Dunzo, given the latter's significant IP ties with Reliance Retail, India's largest retail chain. Moreover, Reliance Retail, Dunzo's primary investor with a 26 per cent stake in the startup, has not yet sanctioned the deal.

Over the past three years, Dunzo has explored acquisition discussions with multiple entities, including Tata and Zomato, according to numerous sources familiar with the matter. However, Dunzo refuted this report, calling it "hearsay", added TechCrunch.

Dunzo, backed by prominent investors including Google, Blume Ventures, and Lightbox, initially aimed to disrupt India's e-commerce sector with its rapid delivery services. However, several instant delivery businesses, including Dunzo, encountered challenges as consumer preferences reverted to pre-pandemic norms.

According to a report by the Economic Times, PhonePe, a financial services startup that demerged from Flipkart in late 2022, reportedly explored an investment in Dunzo's merchant network business in December 2023. However, Dunzo was not interested in the deal due to concerns regarding the strategic nature of the company backed by Walmart.

Media reports suggest that Dunzo had also sought to raise $50 million in 2023, though the completion of that funding round remains uncertain.