Flipkart considers acquiring Dunzo, a Reliance-backed instant delivery startup

Indian e-commerce giant Flipkart has been in discussions in recent weeks regarding a potential acquisition of Dunzo, a hyperlocal delivery startup backed by Reliance Retail, according to three sources familiar with the matter. However, complexities surrounding Dunzo’s ownership structure have posed challenges, making it difficult for the two parties to finalize a deal, two of the sources said.

The ongoing acquisition talks follow a challenging period for Dunzo, which has faced difficulties in raising funds and meeting staff payroll. Despite having raised approximately $500 million to date, Dunzo has faced increasing competition from emerging players like Zepto, Swiggy, and Zomato’s BlinkIt in the hyperlocal delivery market.

While the deal has yet to materialize, Flipkart, owned by Walmart, sees value in certain assets of Dunzo, particularly its business-to-business offerings. However, uncertainties remain regarding what assets Flipkart would be able to acquire, given Dunzo’s IP relationships with Reliance Retail, India’s largest retail chain, which is also Dunzo’s largest investor.

In response to the report, Dunzo denied the acquisition discussions, labeling them as “hearsay” and asserting that it is on track to achieve free cash flow break-even in March 2024. Nevertheless, over the past three years, Dunzo has reportedly engaged in acquisition talks with various companies, including Tata and Zomato.

The discussions between Flipkart and Dunzo reflect the challenging landscape for instant delivery companies, which experienced heightened demand during the early stages of the Covid-19 pandemic but have since encountered difficulties in sustaining strong unit economics.

Dunzo, founded in 2014 and backed by notable investors including Google, Blume Ventures, and Lightbox, initially aimed to revolutionize India’s e-commerce sector with its half-hour delivery service. However, shifting consumer behavior and market dynamics have posed challenges for Dunzo and other instant delivery businesses.

While Dunzo has pivoted its focus back to hyperlocal services, investing in initiatives like dark stores, it has faced hurdles in achieving sustainable growth amid changing consumer preferences. The company had reportedly sought to raise $50 million in funding in 2023, and potential investors, including PhonePe, have explored investment opportunities in Dunzo.

Flipkart has yet to respond to inquiries regarding the acquisition talks with Dunzo.