Scoop: Dunzo secures $75M via convertible notes, fires 30% staff; Tim Cook may visit India as Apple opens first company-owned store

By Daisy On Apr 6, 2023

Reliance Retail-backed quick commerce startup Dunzo has secured funding of $75 million through convertible notes. It is also laying off about 30% of employees in addition to planning a shift in the business model.

This and more in today’s ETtech Morning Dispatch.

Also in this letter:
■ Indian shoppers to spend $140-160 billion online by 2025
■ ADIF seeks CCI review of Google’s app billing syste
■ NIC still evaluating bids to manage National Government Cloud

Scoop: Dunzo secures funding via convertible notes, lays off 30% staff

Hi Digbijay here in Bengaluru. We are breaking an important story on Dunzo this morning. The Reliance Retail-backed startup has secured new financing through convertible notes. While that’s come as a relief for the quick commerce company which has been struggling to raise fresh capital, Dunzo has also decided to fire a large part of its workforce in a bid to save cash and turn profitable. There’s more: it’s also making changes to its business model.

What’s driving the news: Reliance Retail –the single largest investor in Dunzo with nearly 26% stake–and Google have wired about $50 million of capital in the Bengaluru firm as part of a $75 million financing through convertible notes. Rest of the money is likely to come from other existing investors. We told you first on January 6 about this round being in the works.

Jargon buster: A convertible note is a form of short-term debt that converts into equity, typically during a future financing round, or an IPO. It requires no valuation to be ascribed to a company immediately, and has been used widely by Indian startups over the last few years.

Also read our deep dive on how Indian startups were using convertible notes to raise capital

Big job cuts: Despite the new funds coming in, Dunzo has fired about 30% of its team– that’s about 300 people and one-third of the company. The move to cut jobs, underscores how startups went overboard in hiring and scaling business plans in 2021 as cost of capital was dirt cheap. Dunzo had earlier fired 3% of staff in January, as we had reported.

Also read: ETtech Long Read: Quick commerce may find it tough to bag new users, investors in 2023

Tell me more: Dunzo cofounder and CEO Kabeer Biswas told employees about the job cuts in a town hall on Wednesday. He also briefed them about the changes that are coming including shutting 50% of its dark stores and running only those that can be profitable or are nearing that threshold.

Exclusive: Tim Cook may visit India this month to launch Apple’s first company-owned store

Apple CEO Tim Cook takes 40 pay cut for FY 2023

Apple chief executive Tim Cook is likely to visit India this month for the launch of the iPhone maker’s first company-owned store in the country, people with knowledge of the matter told us.

Meet with PM likely: Cook will also discuss strategic issues such as manufacturing expansion and exports from India with key ministers, sources said, adding that if the visit does take place, it could possibly include a meeting with Prime Minister Narendra Modi. The company’s senior vice-president of retail and people, Deirdre O’Brien, is also likely to accompany Cook this time, said people in the know. On his first visit in 2016, Cook had interacted with executives and Bollywood superstars, besides reviewing Apple’s India operations.

Flagship store launch: On Wednesday, the iPhone maker revealed the barricade of its store at Jio World Drive Mall, Mumbai. The Mumbai store launch will be followed by a retail store in Delhi-NCR. India has been one of the consistent growth markets for Apple. The country features largely in Apple’s plans to diversify its manufacturing reliance away from China.

India in ‘focus’: Cook had in February told analysts that India is a “hugely exciting market” and a “major focus”. Apple sold about 6.7 million units of iPhones in India in 2022, up from 4.8 million units in 2021 and 2.7 million units in 2020, as per IDC data. We recently reported that Apple became the first company to export smartphones worth $1 billion from India in a single month in December 2022. The company assembles iPhones, including the latest iPhone 14, in the country through three Taiwanese contract manufacturers — Foxconn, Wistron and Pegatron — in Tamil Nadu and Karnataka.

Reliance takes on Nykaa with omnichannel beauty ecommerce Tira

India’s largest retailer Reliance Retail Limited on Wednesday announced the launch of Tira, an omnichannel platform for beauty products.

What are the details: The flagship Tira store spread across 4,300 square feet was launched at Jio World Drive in Bandra Kurla Complex in Mumbai, along with the launch of Tira app and website.

The platform, with dedicated makeup, skin and haircare, fragrances, bathing, men’s beauty and luxury sections, was initially thrown open for all Reliance employees, we reported on February 15.

Why does it matter? We had exclusively reported in January last year that the Mumbai-based conglomerate had signed agreements with leading cosmetics and beauty brands to sell on its marketplace.

With Tira’s launch, Reliance will be taking on Nykaa, Tata Cliq Palette, Myntra and other players in the beauty space.

Cut in discretionary spending impacted Nykaa: “Consumer pullback in discretionary spends has had some impact on our fashion business, leading to subdued growth in NSV (net sales value) this quarter,” Nykaa said in a stock exchange filing. “For Q4 FY23, we expect our percentage revenue growth rates in the fashion business to come through in the late teens,” it added. For the December quarter, Nykaa’s fashion vertical reported a 43% year-on-year growth in revenue from operations, and a 50% on-year growth in gross merchandise value (GMV).

Tweet of the day

NIC still evaluating bids to manage National Government Cloud

Six months after floating a tender, the National Informatics Centre (NIC) is still evaluating bids for managing the National Government Cloud. The validity of the bids expires next month and industry executives expect a rebid.

No clarity: A cloud service provider empanelled with the Ministry of Electronics and Information Technology (MeitY) told ET, “The tender says the bid has a six-month validity period. It has already been six months. It may not have been a successful request for proposal. It may come up for a rebid, there is no information”.

What’s driving the news: A recent statement by the MoS IT Rajeev Chandrasekhar brought the limelight back on the National Government Cloud when he said the cloud infrastructure business is dominated by three companies — Microsoft Azure, Amazon, and Google. Further, to counter this, a secure government cloud will be set up via a public-private partnership (PPP) where a private company will be selected.

Indian shoppers to spend $140-160 billon online by 2025: report

A report from Boston Consulting Group and Matrix Partners India suggests that online consumption categories such as fashion and apparel, food and FMCG, and beauty and personal care will have a higher share in India’s online retail pie by 2025.

Ecomm adoption: The pandemic accelerated digital penetration by 12–24 months across different sectors, which will boost the adoption of e-commerce in reaching a total of 350 to 400 million online shoppers spending $150 billion by 2025. At 25%, the fashion and apparel category is expected to have the highest share of online retail spending in estimated overall online retail spends of $140 billion to $160 billion by 2025. In 2021, the category stood at 20% of $50 billion to $55 billion. The category is also replacing the mobile devices category, which is expected to fall to 23% in 2025 from 32% in 2021.

Quote, unquote: “While mobiles used to be a very large portion of ecommerce marketplaces, the absolute number is not coming down. The actual number is growing. The base is growing, but the penetration is already high,” Siddharth Agarwal, principal, Matrix Partners India, told us.

Affluent consumers: The report also mentioned how increasing affluence in the country over the next few years — measured by an increasing number of households having annual income of more than Rs 5 lakh — is likely to drive discretionary spending and spur growth in categories beyond food and clothing.

ET Ecommerce Index

We’ve launched three indices – ET Ecommerce, ET Ecommerce Profitable, and ET Ecommerce Non-Profitable – to track the performance of recently listed tech firms. Here’s how they’ve fared so far.

Internet group approaches CCI to review Google’s app billing system

Competition watchdog CCI in a bind over lack of quorum

Google’s user-choice billing system might come under the scanner once again. The Alliance of Digital India Foundation (ADIF) — which represents domestic internet companies such as MapMyIndia, Paytm, Matrimony, TrulyMadly — has urged the Competition Commission of India (CCI) to look into “Google’s abusive dominant practices urgently”.

Catch-up quick: Last October, Google paused the enforcement of its new billing system for in-app purchases on Android devices, which was to be effective from October 31. The billing system — under which app developers need to pay a commission of 11-26% to the US-based tech giant — now becomes effective later this month.

ADIF’s submission: “Google, a company that has built its reputation on innovation and disruption, is resorting to these practices despite CCI directing Google to mend its ways in a similar case and fined it Rs 937 crore for abusing its dominant position with regard to its Play Store policies. This commission is not so different from the colonial ‘Lagaan’ — it is unfair to app developers and to the millions of users who rely on digital applications for their day-to-day activities,” the ADIF said.

Google’s stance: Following the two CCI orders last year, which together saw a penalty of Rs 2,274 crore being imposed on the company, Google announced in January it was introducing around five changes to the way it operates Android and Google Play billing in India. Among these was a step to expand user choice billing to all developers.

In February, the company told developers they have till April 26 to comply with the new Google Play payments policy, which permits alternative billing options.