No image 5paisa Research Team 11th December 2022

Reliance Retail Acquires Stake in Dunzo

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Gone are the days when you would order your home needs like provisions, toiletries and food products and then wait for up to 24 hours to get the delivery. The latest trend in the online commerce space is “Quick Commerce”.

The last mile delivery mechanism is fine tuned to such an extent in Quick Commerce that the actual delivery happens in less than 30 minutes. As much as it is logistically complex, that is what the market is turning to.

It is in this light that the latest deal by Reliance Retail Ventures to pick up a 25.8% stake in Dunzo becomes extremely relevant. Dunzo specializes in Quick Commerce and has been a sought after business by strategic buyers to private equity investors.

Even as Reliance Retail acquired the 25.8% stake in Dunzo, other key players in the space like Swiggy and the Tata Group had already been in the race to pick up a controlling chunk in Dunzo Ltd.

Dunzo already has equity participation from existing investors like Lightbox, Lightrock and Alteria Capital. These companies also participated in the latest round of funding which was led by Reliance Retail. The total funding was to the tune of $240 million.

Out of the $240 million raised by Dunzo in this round, $200 million came from Reliance Retail with the balance coming from the other early investors in Dunzo. The $200 million investment will give Reliance Retail a 25.8% stake in post-diluted equity.

The latest Reliance deal pegs the valuation of Dunzo in the range of $770-$800 million. That is more than twice the overall enterprise valuation of $300 million that Dunzo got in its last round of funding.

For Reliance Retail Ventures, there is an automatic fit with the JioMart business. JioMart has given the ideal combination of technology and supply chain management in one single platform. However, rapid commerce was still missing in the Reliance Retail business model.

The acquisition of Dunzo will also peg that gap as Dunzo will ensure rapid delivery across India as the front end for Reliance Retail. This quick commerce shift has made Dunzo more valuable in recent times.

The quick commerce space is seeing a lot of players entering the market. Blinkit (formerly Grofers) has already ventured into the quick commerce space. Swiggy has already launched its Swiggy Instamart to address the quick commerce market. Not to forget, the Tatas have already targeted Big Basket to start 15-30 minutes delivery shortly.

This deal with Reliance will also put Dunzo in a good position ahead of its proposed IPO, which is planned over the next 3 years. Surely, Reliance Retail appears to be in the right place at the right time.

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