Dunzo revenue jumps 66% to Rs 46 Cr in FY21, outstanding losses balloon to Rs 768 Cr

Hyperlocal delivery startup Dunzo is one of the ventures which saw a surge in its customer base during the pandemic-induced lockdowns imposed in the country, scaling up operations significantly as on-demand groceries and local deliveries became the need of the hour.

The positive impact of the pandemic also reflects in its gross merchandise value or GMV. Dunzo claimed that the GMV on its platform surged by nearly 64% to Rs 590 crore in FY21 from Rs 360 crore in FY20. Fintrackr sifted through its financials for the financial year 20-21 to understand how the surge in GMV reflected in its books.

How collection from merchants and riders improved for Dunzo

Dunzo saw its revenue from operations swell up in line with its GMV, i.e. growing by 66.5% to Rs 45.8 crore during FY21 from Rs 27.5 crore earned in FY20.

Further breaking down Dunzo’s income streams reveals that it derives around 96% of its operating revenues from commissions collected from merchants and delivery riders in lieu of usage of the company's platform. 

While commissions from merchants grew by 58.6% to Rs 23.16 crore, commissions collected from its delivery riders swelled up by nearly 68% to Rs 20.8 crore during FY21. The company has also collected Rs 1.53 crore from brands as a campaign fee during the same period.

Dunzo has been working on its dark stores and warehousing facilities, investing around Rs 18.6 crore on infrastructure during the last fiscal. Its income from warehousing fees jumped 17.6X to Rs 39.6 lakh during FY21.

Moving over to the expense side, employee benefit expenses has stood out as the largest cost centre for Dunzo, accounting for 37.4% of the annual costs. These expenses grew by 24.7% to Rs 91.6 crore in FY21.

Importantly, employee stock options (ESOPs) payments accounted for 11% of these payments during the last fiscal. 

Dunzo’s austerity measures in FY21

During the previous fiscal, Dunzo focused on reducing its cash burn which had an impact on payments to delivery riders. While commission collections from delivery riders have increased, delivery rider related expenses incurred by the company have contracted by 56.42% from Rs 115.2 crore in FY20 to Rs 50.2 crore in FY21. 

Even with the increased number of deliveries (64% jump in GMV & orders), these payments only make up 19.04% of Dunzo’s annual costs in FY21 while they accounted for 32.05% during FY20.

Interestingly the annual report also states that the company had “erroneously made an excess payment of Rs 7.25 crore to its riders” on 6 July 2020. The company claims that it has recovered 62.6% of this extra payment and the rest have been accounted for in provisions. This comes at a time when delivery companies are being heavily criticized for creating harsh working conditions with low pay for its riders. 

Furthering the austerity measures, Dunzo reduced its expenditure on advertisement and promotion by 85.7% to Rs 11.03 crore during FY21. Information technology (IT) and communication costs grew by 30% to Rs 43.22 crore while Dunzo lost another Rs 9.81 crore on returns/refunds during FY21.

Payment gateway and prepaid instrument expenses of Rs 7.72 crore pushed total expenses to Rs 263.6 crore in FY21, recording a 26.7% YoY drop. On a unit level, Dunzo spent Rs 5.75 to earn a single rupee of revenue during FY21. 

Bottomline: Dunzo still far from breaking even

As a result of the server cost-cutting methods, Dunzo has managed to reduce its annual losses by 33.3%  from Rs 338.4 crore in FY20 to Rs 225.7 crore in FY21. While the cash burn has slowed down, outstanding losses of nearly Rs 768 crore and an abysmal EBITDA margin of -425.3% indicate that there's a long way ahead for Dunzo management before they break even.

Looking at the overall numbers, Dunzo has clearly improved its financial performance in FY21. However, the company is likely to take at least a couple of years more from here to churn a profit. The company will have to work harder to achieve sound unit economics while competing with deep-pocketed rivals: Swiggy, Grofers and BigBasket.

Changing gears in the online grocery space

Of late, Dunzo has increased focus on instant delivery of groceries (within 10-15 minutes) and aggressively setting up networks of dark stores across major cities. The company is also getting close to BigBasket as it’s using one of its warehouses in Bengaluru. The proximity may translate into a deal where Tata Digital (BigBasket’s new owner) could invest in Dunzo.

The e-grocery space in India is going through consolidation. While BigBasket had gone to Tata, Grofers recently raised $100 million from Zomato and the food delivery company may acquire the SoftBank-backed firm in the long haul. The independent play in e-grocery appears to have come to an end, but that’s not the case.

A clutch of new companies such as DealShare and CityMall have come up with a different model in the online grocery space. Mumbai-based Zepto is a new entrant and according to Entrackr’s sources, the company is set to raise a large Series A round soon.