Reliance Retail buys 25.8% of Dunzo. Valuations apart, makes ‘immediate’ business sense.

Reliance Retail Ventures Limited (RRVL), a subsidiary of Reliance Industries is investing $200 mn (approx Rs 1,500 crore) into Dunzo, a hyperlocal delivery new age business.

Key points to note –

  • $200 mn is part of the $240 mn round, wherein balance $40 mn is contributed by Dunzo’s existing investors including Lightbox, Lightrock, 3L Capital and Alteria Capital.
  • In lieu of it’s investment, RRVL will own 25.8% of Dunzo on a fully diluted basis.
  • Dunzo was founded in 2015 and is currently present in 7 Indian metro cities. Prior to this round, Dunzo had raised about $128 mn across 15 rounds from investors as mentioned above and others including Google.

Rationale for RRVL’s investment

For Dunzo – beside funds (that it would have raised in current markets anyways), it gets a ready network of supplies across India from Reliance Retail and Jio Mart Stores (including lakhs of mom and pop stores that Jio is converting).

For RRVL –  it gets a readymade hyper local delivery platform to connect to the retail store network. Beside, it may further get ownership benefits if Dunzo’s overall business continues to grow.

One can raise questions about the valuation at which the deal has been done. In FY 19-20, Dunzo lost Rs 343 crore on a revenues of Rs 77 crore. For strict traditional valuers, the valuation of $775 mn of a loss making business doesn’t make sense.

However, in the current market there is not much scope for negotiations. Either you take it or leave it. Reliance has decided to take it.

Otherwise also, Reliance has become very aggressive across all it’s key verticals in the recent times. Checkout Reliance’s information track.

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