In a recent development, the National Company Law Tribunal (NCLT) has provided a two-week window for Dunzo, the hyperlocal startup backed by Reliance Retail, to negotiate a settlement with its vendor Betterplace Safety Solutions over outstanding dues. This extension offers a temporary respite for Dunzo, potentially forestalling new insolvency proceedings in the immediate future.
Negotiation Opportunity
The extension, granted by a bench comprising judicial member K Biswal and technical member Manoj Kumar Dubey, follows Dunzo’s plea seeking a 14-day timeline to engage in settlement discussions with its creditors. The startup’s legal counsel expressed earnest efforts towards reaching an agreement and highlighted ongoing investment inflows. The proposed deadline of June 20 aims to facilitate resolution discussions.
Vendor Concerns
In response, Betterplace’s legal representative conveyed reservations regarding the prolonged settlement talks, citing a lack of confidence and emphasizing the need for safeguarding their interests. The vendor underscored the importance of securing assets or protective measures to mitigate potential losses within the Insolvency and Bankruptcy Code’s framework.
Pending Dues Dispute
The underlying issue revolves around Dunzo’s default on payments owed to Betterplace, encompassing services ranging from background verification to asset management. Betterplace initiated insolvency proceedings against Dunzo under Section 9 of the Insolvency and Bankruptcy Code (IBC) earlier this year in response to the payment default, although specific debt details remain undisclosed.
Financial Respite Prospects
The latest development coincides with reports of Dunzo’s imminent closure of a funding round aimed at addressing longstanding liabilities, including employee remuneration. CEO Kabeer Biswas articulated the strategic significance of the impending funding in stabilizing the company’s operations and ensuring long-term viability.
Company Background and Challenges
Established in 2015 by Biswas and his co-founders, Dunzo initially focused on hyperlocal services before reverting to its core model amid financial constraints. The startup grapples with a myriad of challenges, including mounting losses, delayed vendor payments, and legal disputes. Its fiscal performance, underscored by a substantial loss increase in FY23, reflects the broader operational struggles faced by the company.
Market Performance and Future Outlook
Despite the setbacks, Dunzo’s revenue exhibited notable growth in FY23, indicative of sustained market demand for its services. The startup’s impending funding infusion and settlement negotiations signal a potential turnaround trajectory, albeit against the backdrop of intensified competition and regulatory scrutiny.
