Tata-Dunzo deal talks stuck over a key contour | Economic Times

Tata Digital’s potential investment in Dunzo is stuck over a critical contour of the deal, where the hyperlocal startup does not want to give majority control, sources aware of the matter said. While negotiating terms with the Tatas, Dunzo is simultaneously in active discussion with financial investors for a fresh $100-120 million at an estimated valuation of $500-600 million, according to the people cited above.They told ET the Bengaluru-based company’s founders are “not in favour of giving majority control to the Tatas, but negotiations are underway to work this out.”“(Dunzo) is considering if a (potential) Tata investment can work with (the group) becoming the single-largest shareholder but not in majority control of the company. That’s one of the options on the table,” the person added.Delivery DealThe five-year-old startup’s engagement with Tata Digital comes at a time when the group is bullish on quick delivery of groceries and other essentials, as other ecommerce players are also in a race to supply essentials to consumers within 10-30 minutes.“Dunzo feels that in this current environment, it is the only such startup left that can execute 20-minute deliveries, and is not keen on giving up majority control,” one person in the know said.In recent months, Tata Digital has closed high-profile buyouts in India’s burgeoning new economy space, including BigBasket and e-pharmacy 1mg, while making a minority investment in serial entrepreneur Mukesh Bansal’s Curefit. Bansal has joined the digital arm of the steel-to-salt conglomerate as its president, as ET reported first.Dunzo, which is backed by Google, is also in active discussions with Tata group-owned BigBasket to power the e-grocer’s express delivery service, according to four people in the know.“Tatas are very bullish on quick deliveries, as the market has evolved compared to five years ago,” said one person aware of the group’s ongoing talks with Dunzo.The launch of express deliveries for BigBasket will involve setting up dark stores across the country, starting from Bengaluru. Though express delivery as a concept is defined as deliveries within an hour, BigBasket is aiming at around 30 minutes.Kabeer Biswas, cofounder and chief executive of Dunzo, said in a statement to ET that he was in conversations to raise the next round of capital and will have more to share soon. He did not comment on ET’s questions on the various aspects of a potential investment from Tata Digital.A questionnaire sent to BigBasket chief executive Hari Menon and a spokesperson for Tata Digital did not elicit any response till press time on Wednesday.Boost in ValuationDunzo, which is estimated to have doubled its gross merchandise value, or annualised GMV, to $200 million over the past year, is seeking a matching boost in its valuation from negotiations underway with multiple growth-stage investors.“Based on these metrics, it is seeking a higher valuation from investors, but the Tata Digital investment talks can’t be ruled out,” said one person cited above.The Bengaluru-based startup was last valued at $300 million. 85441838In response to ET's queries on its discussions with BigBasket, Biswas declined to comment.Currently, Dunzo has access to one of the BigBasket’s dark stores in Bengaluru’s Domlur area for its service titled Dunzo Daily, which offers 19-minute delivery for a select set of products. “Dunzo Daily is powered through multiple shops in the city and one dark store of BigBasket for now. Current talks are to extend this partnership for BigBasket’s express deliveries,” one person aware of details said. Biswas did not comment on this either.Biswas, however, said Dunzo’s largest business continues to be daily and weekly consumables. “It is about 85% of our overall business and Dunzo Daily is our primary play to take it to millions of users across the country.”Last month, ET was the first to report that BigBasket is planning to start express deliveries over the next two to three months. “The idea is to set up 1,500-2,000 sq ft dark stores that can be set up in different neighbourhoods. Both parties are keen to make it work and that’s where it is headed now,” said a source aware of developments, with Dunzo being confident of rolling out 5-10 dark stores quickly in eight to 10 cities. “As per current discussions, the eventual plan is to take it to 25 cities, with 400-500 such dark stores.”Confirming that the Dunzo Daily model is now live in Bengaluru, Biswas said, “We aim to take this to other cities very soon to ensure this convenience is available to every consumer.”Express DriveIndia’s top consumer commerce platforms are all scaling up quick deliveries. Grofers, which raised $100 million from Zomato recently, has set up 15-minute grocery delivery in Gurgaon and is delivering essentials in 10 minutes across 10 cities.Food delivery platform Swiggy is also bulking up its hyperlocal grocery offering Instamart — which promises to deliver in 15-30 minutes — on the back of its fundraise led by SoftBank Vision Fund.Flipkart also has 90-minute delivery options for essentials, while Amazon has a two-hour delivery through Fresh.“Our learning has told us conclusively that there is very little difference between 10 and 20 minutes with users, but it’s important to be truthful with them at each transaction as one scales (up),” said Biswas. “As the market leader in the segment, we have always aimed at under-promising and over-delivering with our users on delivery times.”“Also, we do believe there are many more aspects of delivering groceries than just on-time delivery. Consumers care about all 5 aspects — speed, selection, price, quality & reliability,” he said.A recent report by market research firm RedSeer stated that ‘quick commerce,’ which means delivering within 45 minutes, is estimated to be a $0.3-billion market in 2021. It is expected to grow 10-15 times in the next five years to $5 billion by 2025.ET has reported that even 1mg is planning to deliver medicines in an hour. “For grocery, timelines are shorter, but for medicine, it will still be around an hour. But they (Tatas) are very bullish and clear about doubling down on this,” said a person aware of the group’s thinking.