Udaan, India’s biggest B2B e-commerce platform, has raised $250 million in debt and convertible notes. The Bengaluru-based company raised $200 million using a convertible note, which is a kind of short-term financing that converts to equity. The move is expected to pave the way for Udaan to go public in 18 months, boosting the company’s value at that time.
During its most recent round of $280 million in January 2021 from current and new investors, Udaan was valued at $3.1 billion. According to industry insiders, the current round’s value will be determined at a later point, either at the IPO or during the pre-IPO investment rounds.
A convertible note is a pre-IPO financial instrument that converts to stock during the initial public offering. Uber, Airbnb, Robinhood, and Spotify are just a few of the large internet businesses that have effectively deployed convertible notes.
As it designs its path towards public markets, Udaan is “broadening the capitalization approach.” The business began creating a completely new muscle in our finance department with this convertible offering.
So far, the company has raised $1.4 billion. The bulk of India’s business-to-business industry is still unorganized. As a result, merchants around the country are now required to go to other cities — where all of the large dealers are located — to replenish their inventory. Small businesses, on the other hand, struggle to acquire the best deal and access to a wider inventory since they lack negotiation leverage.
Udaan, formed by three experienced Flipkart employees, Amod Malviya, Vaibhav Gupta, and Sujeet Kumar, aims to tackle this problem by connecting small companies with wholesalers and dealers. Hundreds of companies have joined on with the firm, which now serves over 3 million merchants and small and medium-sized enterprises.
Apart from the inventory issue, Udaan also assists businesses in obtaining operating cash. Small companies, particularly mom-and-pop stores, depend on the proceeds from the sale of their current inventory to fund the purchase of their next batch. Udaan is able to evaluate whom it may securely lend working money to based on the participation of various merchants on the site.
Last year, the business named Vaibhav Gupta as its CEO, kicking off the process of preparing for an IPO. The firm didn’t have a CEO before the transfer. Several companies, including e-commerce behemoth Amazon, India’s biggest retail chain Reliance Retail, and startups like Khatabook, Jumbotail and Dukaan, are aiming to serve this enormous merchant base by providing services such as working capital and digital point-of-sale terminals.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.