Udaan, a pioneer in building the country’s e-B2B category for kirana stores, has gained both in terms of market and mind share with its full-stack approach. Vaibhav Gupta, CEO tells FE’s Tushar Goenka that the company is on track with its plans to achieve sustainable growth as it readies itself for a public listing. Excerpts:
Q) Udaan has raised $155 million in the last few months. What are the fundraising plans going forward? Are there any changes in the IPO and profitability timelines?
A. We’ve started quite a bit of work on our IPO. Having turned unit economics positive in first half of calendar 2022, we are working towards being Ebitda positive, and then on our IPO in the next 12-18 months. Our next fundraise will depend on our IPO requirements. Funding rounds are now going to be less for the need for capital to run the business, and more about how we can strategically run the business and find the right type of investors. Timing will be more discrete rather than need-based.
Q) Capital infusion into startups has slowed, how is Udaan navigating the situation?
A. We have now moved to a durable growth rate of 40-50% annually from over 70% in FY22. We were proactive with our cost cuts and began our journey towards profitability in the later half of 2021 when the market was still hot. So, we were better prepared when things slowed down. In all, there has been no undue pressure because of the slowdown because we started to focus on the mid to long-term journey earlier than the others.
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Q) How is Udaan Capital faring? What is the reach and how much has it grown over the years?
A. Udaan Capital has been very important for Udaan’s success. Vendors did not have the capability to finance small shopkeepers on pan-India basis and shopkeepers don’t have the capacity to invest money in all vendors’ products. We started Udaan Capital like Amazon Web Services — first built to meet our own needs but realising the opportunity, the company now finances other small brands who do not transact with Udaan. Started in 2019, Udaan Capital has now grown to a `400 crore loan book.
Q) What are the margins at Udaan like? How is the company able to offer competitive pricing?
A. Our margins reflect the industry standard and can be as low as 2-3% for commodities but higher at around 12-14% in other categories. We don’t offer discounts to our customers and don’t think that is a long-term strategical bet. It doesn’t work.
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Q) How will you describe the scaling up of Udaan? What are you doing to better your services?
A. We deliver to over 1,000 towns overnight and we are working on adding more towns to that list. To give you an idea of the scale, Udaan sends 15 tonnes of goods from Bengaluru to Mysuru every day while our nearest competitor sends 900 kilograms at max. We keep an eye on what our competitors keep doing. Our shipping cost is also a tenth of what our closest competitor charges.