E-Commerce Startup Udaan To Trim Costs Ahead Of 2025 IPO

(Bloomberg) -- E-commerce startup Udaan is working to curb costs and forge new partnerships with consumer brands in India as it prepares to go public in 2025.

Udaan, which competes with Reliance Industries Ltd. and Walmart Inc.’s Flipkart in helping smaller merchants source their goods, will make an operating profit within 18 months, Chief Executive Officer Vaibhav Gupta said in an interview. That’s set to happen around the same time as its initial public offering, he said.

The priority “is steady and predictable financial performance,” Gupta said. “Second, strategically we want to ensure that we are top of mind with shopkeepers, with big manufacturers, and we maintain our relative market share.”

Lightspeed Venture Partners-backed Udaan is among startups trying to tap the rapid growth of India’s economy and consumer market, while meeting investor demands for profitability. Udaan, which at its peak employed thousands, joined fellow Indian startups in slashing jobs last year and tightening internal controls and compliance. It now has about 1,800 staff, and Gupta didn’t specify if further job cuts are needed.

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Corporate governance lapses at Indian online tutoring firm Byju’s, once the country’s top startup with a valuation of $22 billion, shone a light at unique challenges faced by founders in the South Asian nation and drove companies to be more diligent.

“We continue to move towards more professionalized management, professionalized board and also institutionalized shareholders as we go towards public markets,” Gupta said.

Udaan is yet to decide whether it will list in India or overseas. It was valued at more than $3 billion in a 2021 funding round, and was in talks to raise $400 million, Business Standard reported in September. Lightspeed owns about 35% of Udaan, while Tencent Holdings Ltd. holds 6%.

The company was founded in 2016 by three engineers who previously worked at Flipkart. The trio together ran Udaan until Gupta, one of the founders, took over as CEO in 2021. The other two founders — Amod Malviya and Sujeet Kumar — are board members.

Udaan built an online marketplace and logistics networks that help mum-and-pop stores get quicker deliveries and cut traditional middlemen out. That kind of digital-led wholesale business still accounts for a very small part of India’s overall retail market but can balloon to $150 billion in sales and yield a 100% return on capital invested in a decade, according to McKinsey & Co. estimates published in the Mint newspaper.

Bengaluru-based Udaan has also ventured into financing through its fintech unit which helps shopkeepers get working capital loans to buy inventory. That business is profitable before taxes and is growing 70% annually, Gupta said.

“That’s a second business in the overall umbrella of Udaan trying to organize trade in the country,” Gupta said. “In addition to commerce, financing becomes an important market opportunity.”

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