Udaan in talks with existing and new investors to raise $400 million

Funding will bolster its balance sheet, IPO plans

Udaan, India’s largest business-to-business (B2B) e-commerce firm, is in discussions with existing and new investors to raise $350-400 million. The Bengaluru-based company is planning to use a combination of new equity capital raise and convertible notes in this fundraising exercise, according to sources.

Lightspeed Venture Partners and M&G are among the existing investors that are expected to participate in this funding round.

“The discussions are going on and the deal is expected to be closed in the next few weeks,” said a person familiar with the matter. “The new valuation of the firm depends on the negotiations and is expected to be decided once the deal is signed.” 

When contacted, an Udaan spokesperson declined to comment.

Last year, Udaan raised a total of $350 million in convertible notes and debt from shareholders and bondholders, with no change in valuation. Udaan was valued at $3.1 billion in its last equity funding round of $289 million in January 2021 from existing and new investors.

Given the current funding scenario where large rounds are rare, this exercise, once completed, will bolster the balance sheet of the company and support its IPO plans, according to sources. This would also support the continued strong growth momentum that Udaan has been witnessing for the last few quarters.

Udaan has maintained its leadership in the B2B e-commerce category, with the company almost hitting the Rs 10,000-crore revenue mark in FY22. The firm witnessed 66.8 per cent growth in its gross revenue at Rs 9,900 crore in FY22 from Rs 5,934 crore in FY21, according to media platform Entrackr.

With an eye on profitability, the company has taken a series of steps in the recent past to reduce costs and enhance operational efficiency. The firm recently made organisational changes encompassing both its business units (BUs) – essentials and discretionary business – and the technology function. As part of this organisational change, the essentials business, encompassing FMCG, staples, and pharma categories, will be merged with the discretionary business, which includes general merchandise, lifestyle, and electronics categories. The integration of these two business units serves the twin objectives of “synergy in operations” and building “excellence in commercial capabilities”. The firm also reorganised its technology function into separate “product” and “engineering” functions.

Udaan competes with players such as Amazon, Flipkart, and Reliance’s JioMart in the B2B e-commerce space. This market is expected to surpass sales of $125 billion by 2027, growing at a CAGR of 45 per cent, according to a report by Avendus Capital.