Financial crisis hits hard: Indian firm enforces salary cap of US$914 amid cash crunch

Dunzo, a hyperlocal quick commerce company grappling with financial difficulties, implemented a salary cap of US$914for employees in June, according to sources familiar with the matter who spoke to Moneycontrol.

This meant that regardless of their actual salary package, no one would receive more than the fixed amount. The move aimed to ensure that employees earning less than the capped amount would receive their salaries in full.

However, earlier this week, it was reported that Dunzo had deferred June salaries for approximately 500 employees, representing around 50 per cent of its workforce. Co-founder and CEO Kabeer Biswas and the top management assured employees that the salary caps were only applicable for June and that all dues would be cleared by July 20.

Impact on senior employees and lack of prior intimation

Senior employees at Dunzo were reportedly most affected by the salary deferrals. Approximately 60-65 per cent of the workforce received their full salaries, while 35-40 per cent received only a partial payment of US$914for June.

An employee, speaking anonymously, revealed that the information about salary caps and deferrals was provided on the day salaries were due, without any prior notice or communication.

Cash crunch despite recent funding

Despite Dunzo raising $75 million in April this year, the company continues to face significant cash burn. While the company made effortsto ensure timely payment of salaries, a business need requiring immediate attention may have necessitated the last-minute communication with employees.

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These recent developments raise concerns about possible layoffs and voluntary exits at Dunzo. The company has already undergone two rounds of layoffs this year, resulting in the termination of approximately 380 employees.

Cost-cutting measures

Dunzo has been implementing various cost-cutting measures to drive profitability.

These include shifting to a marketplace model for sourcing products, shutting down a significant portion of its dark stores, and exiting unprofitable markets.

Additionally, the company has increased delivery fees, introduced delivery delays, and imposed convenience fees on users to enhance revenue per order.

Industry experts, including Swiggy's food delivery CEO, Rohit Kapoor, predict consolidation in the quick-commerce space, reported Moneycontrol.

With only 3-4 significant players expected to survive, Dunzo, alongside Swiggy's Instamart, Zepto, Blinkit by Zomato, and Tata-operated BigBasket, currently operatesin this space.

Dunzo, founded in 2015, has raised close to $500 million since its inception, with major investments from Reliance, Google, Lightrock, Lightbox, Blume Ventures, and others. Reliance holds the largest stake in the company at 25.8 per cent, followed by Google with approximately 19 per cent ownership, according to Tracxn.

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