The investment arm of UK retail bank M&G has raised $340 million in funding to Udaan, a business-to-business e-commerce startup, in one of the largest funding rounds secured by an Indian startup in 2023.
The Bengaluru-based startup, which helps retailers in smaller Indian cities and towns secure stock from big brands as well as access working capital, said the new funds include some convertible debt.
Existing backers Lightspeed Venture Partners and DST Global also participated in the new round, which is awaiting regulatory approval. Udaan competes with several players, including Mukesh Ambani’s $100 billion Reliance Retail, India’s largest retail chain.
The new funding round, Udaan’s first with equity capital since 2021, ensures that the startup is “fully funded” and on track to become profitable in the next 12-18 months, the seven-year-old startup said. The startup is considering filing for an initial public offering in 2025 and has consulted with bankers over the years to check its readiness.
Udaan did not share how M&G and other investors valued the startup in the new round. It was valued at $3.1 billion (after money) in 2021 and the new round is definitely a bearish round. Its gross income in the fiscal year ended in March was about $680 million, while losses were limited to less than $380 million.
The Series E funding, however, is a huge boost for the startup that has spent the past two years cutting costs and becoming more efficient. It also needed some funds to repay a loan due early next year in 2024 and required the startup to have equal funds raised against equity in the bank for the duration of the loan, according to a person familiar with the situation.
Founded by three ex-Flipkart executives, the trio together ran the startup until 2021, when Vaibhav Gupta emerged as the startup’s first CEO.
From Ambani to Bezos’ Amazon to Udaan’s founders’ previous employer Walmart’s Flipkart to FMCG brands and lenders, dozens of companies in India are scrambling to serve kirana stores – the tens of millions of stores, including mom-and-pop shops that they are found in thousands of cities, towns and villages of India and serve as the backbone of the nation.
These retailers and suppliers have traditionally relied on small, local wholesaler networks, which are relationship-based and expensive to maintain. Even some of the biggest brands – such as Unilever, which operates one of the strongest distribution networks – reach only a fraction of the country’s hundreds of thousands of villages, cities and towns.
Udaan works with thousands of sellers and connects them with 3 million retailers, enabling smaller merchants to access high-quality and trusted products across categories including grocery, fruits and vegetables, FMCG, as well as lifestyle, electronics, home and kitchen and pharma.
“Design that works regionally will not only bring us closer to our customers, but also make our operations more flexible and efficient,” Gupta said in a statement. “We are committed, as always, to our mission to empower Bharat’s small businesses while unlocking a uniquely Indian and massive $100 billion eB2B market opportunity.”
The startup says its reach extends beyond 1,200 cities in India for daily delivery and over 12,500 zip codes through a supply chain system. Udaan also extends working capital to small businesses, freeing them from chasing their customers who usually settle at the end of the month or at a later date.
“M&G is delighted to support Udaan as it pursues a profitable growth strategy,” said Niranjan Sirdeshpande, Director of M&G Catalyst (EMEA) in a statement. “We believe it has the right business platform to be the trusted scale partner for small businesses across India, empowering them with technology, financial inclusion and supply chain capabilities. Our investment strategy aligns with Udaan’s ambition to simplify and increase efficiency in a congested B2B market.”
Udaan has raised over $1.5 billion against equity and through debt over the years, according to the market intelligence platform The Credible. It is one of Lightspeed’s largest investments in India and other global markets based on the amount the venture capitalist has put into the startup. Lightspeed owned more than a third of Udaan before the Series E funding.
“We are extremely excited to continue to support Udaan as it further strengthens its leadership position as India’s largest EB2B marketplace,” Bejul Somaia, partner at Lightspeed, said in a statement. “We believe this funding puts the company on an extremely strong financial footing and naturally to further improve profitability while empowering small businesses across Bharat.”
