Troubled quick commerce of platform, Dunzo’s auditor Deloitte has expressed doubt over the company’s ability to continue as a going concern. Deloitte’s comments were appended with regulatory filings for FY23 which showed that Dunzo’s losses in FY23 has shot up by 288% to Rs 1,802 crore.
Deloitte said that Dunzo’s current liabilities exceeded its current assets by Rs 325.8 crore primarily because of significant high operational costs for building customer base.
Since Dunzo’s total liabilities amount to more than its total assets, the company will be unable to repay its creditors in a bankruptcy event. “…the group’s ability to continue as a going concern is significantly dependent on the availability of additional funding, and improvement in business operations. These events or conditions, along with other matters…indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern,” Deloitte added.
While Deloitte said a material uncertainty may cast significant doubt on the group’s ability to continue as a going concern, it also added that the management expects the group to continue as a going concern.
Auditors had flagged similar issues around Dunzo being a going concern even in FY22 but since then, the company’s problems have grown manifold which makes the situation even more grave.
In FY23 Dunzo’s expenses jumped four times to Rs 2,054 crore. According to the company’s filings with the registrar of companies (RoC) in the ministry of corporate affairs, revenues during the year increased to Rs 226 crore from Rs 54 crore in FY22. While the increase in revenue was 320%, the same was on a low base.
The company spent Rs 310 crore on advertising in FY23, which was a sharp jump from Rs 64 crore that it spent in FY22. It marketed its services during the Indian Premier League which resulted in higher expenses but translated to only a marginal increase in revenues. Employee benefit expenses jumped to Rs 338 crore during the fiscal, up 144% from Rs 138 crore in FY22.
Dunzo is facing a severe fund crunch and has delayed salaries to employees since July and even given up its office space to manage its cash flows. Several of its top executives, including two of its co-founders have left the company. It has also received legal notices from several of its vendors for non-payment.
The company is trying for a fund raise of around $25-30 million to meet operating expenses. However, the same is expected to come at a much lower valuation.
Dunzo has so far raised close to $500 million since 2015 from Reliance, Google, Lightrock, Lightbox, Blume Ventures and several others. Reliance is the largest shareholder with a 25.8% stake, and Google the second-largest with around 19%.