Offering some respite to the troubled hyperlocal startup Dunzo, the National Company Law Tribunal (NCLT) has reportedly granted the Reliance Retail-backed company a two-week period to settle its pending dues with vendor Betterplace Safety Solutions.
The latest extension will assist Dunzo in sidestepping potential insolvency proceedings for the next couple of weeks.
According to a Livemint report, a bench consisting of judicial member K. Biswal and technical member Manoj Kumar Dubey provided the extension following Dunzo’s legal representative’s request for a 14-day negotiation period to reach a settlement.
“We have engaged in significant settlement negotiations with the lenders… Additionally, we have been securing investments. We require a two-week extension until June 20th to endeavor to resolve the issue,” the report quoted Dunzo’s counsel as saying.
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In response, according to reports, Betterplace’s attorney informed the NCLT that the vendor has been informed about a settlement for nearly a year, expressing a lack of confidence. Additionally, Betterplace requested “some form of protection” in the shape of the company’s assets, otherwise expressing concerns that nothing would remain for them under the IBC’s corporate insolvency resolution process.
The Bengaluru bench of the tribunal is scheduled to address the matter next on June 19th.
Central to the issue is Dunzo’s failure to fulfill payments to Betterplace. The indebtedness stems from various services utilized by the hyperlocal startup, encompassing background checks, hiring, asset administration, and procurement.
Following Dunzo’s financial constraints and subsequent default on payments, Betterplace lodged an insolvency petition against the startup in February under Section 9 of the Insolvency and Bankruptcy Code (IBC).
As per Section 9 of the IBC, operational creditors are authorized to commence insolvency proceedings subsequent to a payment default. Nevertheless, there appears to be a lack of clarity regarding the precise amount owed to the creditor.
Funding Prospects: Dunzo’s Bid to Resolve Financial Woes
This development comes a month after reports indicated that the cash-strapped startup is poised to finalize a funding round following a year of deliberations. According to the reports, the startup would employ the funds to clear pending liabilities, including employee salaries.
As reported by Livemint, cofounder and CEO Kabeer Biswas communicated to employees internally that the arrangement is anticipated to “secure the company’s future indefinitely.” Sources informed the publication that Dunzo was in the advanced stages of securing between $22 million to $25 million in a combination of equity and debt from both new and existing investors.
Established in 2015 by Biswas, Dalvir Suri, Mukund Jha, and Ankur Aggarwal, Dunzo serves as a platform connecting consumers with nearby stores and enables the delivery of various items such as groceries and medicines.
Last year, the company reverted to its original hyperlocal model due to a significant rise in cash burn. The startup has been contending with various challenges, including delayed salaries, multiple insolvency proceedings, escalating losses, and postponed payments to vendors.
Continue Exploring: Legal troubles mount for struggling Dunzo as companies seek payment resolution
Last year, Dunzo also received legal notices from companies such as Google India, Nilenso, Clover Ventures, Facebook India, Cupshup, Koo, and others regarding outstanding payments.
Financial Performance
The Bengaluru-headquartered startup witnessed a notable increase in losses, reaching INR 1,801 crore in the financial year 2022-23 (FY23), compared to INR 464 crore in the preceding year. On the other hand, revenue from operations experienced a significant growth of 317% year-on-year, amounting to INR 226.6 crore for the fiscal year ending March 2023.
