Deloitte, the auditor for Dunzo, the hyperlocal delivery company, has raised concerns about the company’s ability to continue as a ‘going concern.’ In its latest audit report, Deloitte pointed out that Dunzo may not have sufficient resources to operate indefinitely, potentially facing bankruptcy risks.
Mounting Losses and Financial Discrepancies
Dunzo’s regulatory filings for FY23, coupled with Deloitte’s comments, reveal a troubling financial picture. The company’s net loss surged to Rs 1,802 crore, marking a staggering 288 percent increase from the previous year. Deloitte emphasized that the company’s current liabilities exceeded its current assets by Rs 325.8 crore, mainly due to high operational costs for building a customer base.
Material Uncertainty and Management Response
Deloitte’s report highlights a material uncertainty about Dunzo’s ability to continue as a going concern, emphasizing dependence on additional funding and business operation improvements. However, Dunzo’s management maintains confidence in the company’s continuity.
“Dunzo’s overall platform GMV crossed Rs 1,500 crore in FY23, representing the true scale of our business. Our business burn is now neutral, and we’ve optimized our store network,” said a company spokesperson.
Dunzo’s Efforts Amidst Financial Strain
The financial challenges have led Dunzo to take drastic measures, including holding back salaries, laying off employees, closing dark stores, and relinquishing office space to control cash burn. The company aims to secure $25-30 million in capital, having raised close to $500 million since 2015 from investors like Reliance Retail and Google.
“While facing financial strain, there’s excitement about our growing presence on the ONDC network, our strong logistics business, and the new avatar of Dunzo Daily. We aim to achieve corporate-level profitability in the next 12 months,” added the spokesperson.
The situation raises concerns, given the auditors’ repeated flags about Dunzo’s going concern status, and the company’s recent challenges indicate a more pressing financial predicament.