We were better prepared to tackle slowdown: Udaan CEO
- ByStartupStory | January 28, 2023
With its full-stack strategy, Udaan, a pioneer in developing the nation’s e-B2B category for Kirana retailers, has increased its market and mind share. The company is on track with its ambitions to achieve sustainable development as it gets ready for a public listing, according to Vaibhav Gupta, CEO, in an interview with FE’s Tushar Goenka.
Q) Over the past few months, Udaan has raised $155 million. What future fundraising goals have been set? Has the timing for profitability and the IPO changed?
A.Work on our IPO has already gotten off to a good start. After improving unit economics in the first half of 2022, we are presently focusing on improving Ebitda before preparing for our IPO within the following 12 to 18 months. Our need for an IPO will determine when we raise money again. Funding rounds will now focus more on how we can strategically run the business and attract the right kind of investors rather than the necessity for funds to operate the firm. Timing will be less dependent on needs and more sporadic.
Q) How is Udaan dealing with the slowdown in capital injection to startups?
A.From a durable growth rate of over 70% in FY22, we are presently at 40–50% yearly. When the market was still booming in the second half of 2021, we took aggressive steps to minimise costs and started down the path to profitability. As a result, when things calmed down, we were better prepared. Overall, the slowdown hasn’t put undue pressure on us because we began concentrating on the mid- to long-term journey before the others did.
Q) What is the state of Udaan Capital? How far does it extend and how much has it expanded over time?
A.A key factor in Udaan’s success has been Udaan Capital. Small merchants in India were unable to be financed by vendors, and shopkeepers were unable to invest in all of the vendors’ goods. Like Amazon Web Services, which we also founded, Udaan Capital was first created to satisfy our own needs. However, after recognising an opportunity, the company now finances other small brands that do not do business with Udaan. Udaan Capital was founded in 2019, and it presently has a loan book of over $400 crore.
Q) What kind of margins are there at Udaan? How is the business able to give prices that are reasonable?
A.Our margins are in line with industry standards and can range from 2-3% for commodities to 12-14% or greater for other categories. We don’t provide our clients discounts since we don’t believe it to be a long-term strategic move. It is unsuccessful.
Q) How would you characterize Udaan’s scaling up? How are you enhancing your services?
A.Over 1,000 towns receive deliveries overnight, and we are trying to expand that number. To give you an indication of the scope, Udaan ships 15 tons of cargo daily from Bengaluru to Mysuru, compared to the maximum that our closest rival can ship. We monitor what our rivals continue to do. Additionally, our delivery costs are tenths of what our rivals’ charges.
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