Bengaluru: Business-to-business (B2B) ecommerce startup Udaan has closed a $200 million debt financing round by issuing convertible notes to primarily five new investors, according to an internal company note from chief financial officer Aditya Pande.

ET has reviewed the contents of the note shared by Pande with employees on Wednesday.

The names of the investors were not disclosed in the note. People aware of the matter said Tor Investment, Arena Investors and M&G Investments were among the new investors.

For Udaan, which has said it
intends to go public in the next 18-24 months, the move to pick up debt financing through convertible notes comes across as being significant. These investors will have the option to flip their notes into equity, potentially before the IPO.

“We are excited and glad to share that we have five new marquee investors coming onboard the Udaan juggernaut, as part of our recently concluded convertible note financing. This round was oversubscribed 2x and also saw participation from our existing investors, including those who bought into the company through the secondary (Esop) round in H1 2021,” Pande said in his note.

According to him, the latest financing reflects Udaan’s “broadening the capitalisation strategy” as it embarks on its IPO journey. “With this convertible offering, we, as a company, have started building a complete new muscle in our finance function — which we will continue to strengthen as we go forward,” Pande added. He was previously the CFO at Indigo, the airline company.

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A spokesperson of Udaan declined to comment on its latest financing through convertible notes. Emails sent to the investors named by the people in the know did not elicit any response till press time Wednesday.

Pande said in his note that companies like Airbnb, Uber and Spotify had raised similar debt financing through convertible notes before their IPOs.

The Bengaluru-based company has raised $50 million in traditional debt financing too.

Udaan has undergone a significant change in its management last year. In September, one of its cofounders, Vaibhav Gupta,
was appointed as the company CEO. At the time, Udaan said in an official statement that Sujeet Kumar and Amod Malviya, the other two cofounders, will support the functioning of a CEO-led organisation and continue to shape the strategic roadmap and investment decisions as active board members.

According to sources, the Bengaluru-based firm had explored an equity fundraise last year and appointed investment banker Goldman Sachs. But the company was unable to mop up equity financing at the time, sources told ET.

In January 2021,
it raised $280 million as an extension of its
previous funding round of $585 million after which it was valued at $3.1 billion. All told, it has now raised more than $1 billion from investors like DST Global, GGV Capital, Lightspeed Venture Partners, Altimeter Capital and Tencent.

Founded by former Flipkart executives Kumar, Gupta and Malviya, Udaan has been increasingly looking at selling to customers directly through services like Pickily and Price Company even though its core business remains B2B commerce. In its core B2B business, it counts Reliance’s wholesale business among competitors.

The company had made a recovery to pre-second Covid wave numbers in July last year. Aided by the pandemic, food continues to be its fastest growing segment while pharmaceuticals is another focus area currently. Besides these segments, Udaan’s B2B business operates in segments like fashion, electronics and appliances, home and kitchen, footwear and electricals.

ET first reported in November that the company
was entering the consumer-focussed grocery business through the group-buying or community model with a new platform named Price Company, similar to China’s Pinduoduo.

While Pickily is an online supermarket app catering to the tier-I customers, Price Company is a group buying platform for serving customers beyond the big cities. ET had reported that Udaan is aiming to leverage its existing supply chain network in these markets to scale the new business rapidly in 2022. Pickily is present in select parts of Bengaluru and Hyderabad.

Udaan has around 3 million users, 2 million retailers and 30,000 sellers for B2B commerce. It is currently present in around 1,000 towns and cities across 12,000 pin codes. Given its bullishness on Price Company, it aims to take Price Company to 1,500 towns by December this year, ET reported in November.



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