Growing expenses pull down Dunzo’s earnings; reports loss of Rs 168.cr in FY19

Bengaluru-based hyperlocal delivery service Dunzo, which rose to social media stardom with its relatable campaigns, has reported loss of Rs 168.9 crore in FY2019, as against a loss of Rs 21.9 crore in FY2018. 

As per the financial filings by the company, Dunzo’s expenditure during this period stood at Rs 172.45 crore, with spends on promotions and marketing going up by as much as 62x as of March 2019. 

The company’s total revenues for FY2019 stood at Rs 3.5 crore, an increase from Rs 77 lakh In FY2018. Of this, earning from operations was reported at Rs 76 lakh. Dunzo relies heavily on commissions from merchant partners to shore up its operating revenue, along with income from brand campaigns. The company has said that the commission from runners was nil for FY2019, as compared to Rs 1.54 lakh in FY2018. 

Founded in 2015 by Ankur Aggarwal, Dalvir Suri, Mukund Jha, and Kabeer Biswas, Dunzo claims that it has seen 40x growth in the last 18 months, with 2 million deliveries every month. Dunzo users can order food, groceries and other household items from stores nearby or can get parcels of any kind delivered. 

Also read:
Hyperlocal delivery service takes wings; Dunzo banks on first mover’s advantage

The company has raised funds on a consistent basis and is backed by Google, Blume Ventures, Deep Karla and others. During the series D funding round, Dunzo raised $45 million. They also claimed having 70% repeat customers with a 15% month on month growth in user base and had plans to extend to 25 cities in India. 

Sustainability is questionable here as the revenue is highly dependent on order size and frequency. 

Dunzo’s employee costs make up almost 25 per cent of its total expenses, while the cost of operations is 36 per cent of its total expenses. The business promotion and marketing expenses constitute 15 per cent of the total expenses of the company, which stood at Rs 26.49 crore in FY2019, as against Rs 4.18 crore in FY2018. 

Dunzo paid more than half of what it earned from operations (Rs 3.5 crore) for order cancellations, refunds and others, which stood at Rs Rs 1.91 crore, while this expense was nil last year. Another major expense was communications and support service, which cost the company Rs 6.22 crore in FY2019. Dunzo had earlier said that it aimed to be profitable on a micro-level by the September 2019 quarter. Meanwhile, media reports have quoted Kabeer Biswas, CEO, Dunzo, as saying that the company wants to enter limited markets and wants to cover those markets extensively. The company might even plan an international expansion in the next two years, it was reported. 

With no real revenue and massive expenses, the only way for Dunzo is to pursue new investors for funding. However, based on its reports, it doesn’t seem like the most logical investment right now.