Business-to-business ecommerce unicorn Udaan has flown into rough weather with its growth engine sputtering and revenues going flat.

Once hailed as the digital backbone of India’s fragmented wholesale market, connecting manufacturers, brands, traders, and small retailers across categories from FMCG and lifestyle to electronics and pharma counting on its strict fiscal discipline to wriggle out of the fiscal mess and green shoots of revival have started showing.

The company’s gross merchandise value (GMV) inched up barely 1.7% to INR 5,706.6 Cr in FY24 from INR 5,609.3 Cr a year before, staggering far below the INR 9,900 Cr peak it scaled in FY22, showed filings by its Singapore-based parent Trustroot Internet. Udaan’s consolidated revenues remained flat as it struggled to scale in a tight funding environment and evolving retail dynamics.

Inc42 awaits responses from Udaan to questions sent on its FY25 financials, market share, and other fiscal parameters.

Udaan’s crisis stemmed from a general downturn in India’s B2B ecommerce companies since the last two years. In the initial years, around 2010-11, these were restricted to pure-play technology, connecting retailers to wholesalers and brands through marketplaces, but later on expanded their operations to logistics and warehouses. This called for huge investments.

With profitability going bleak, a slowdown in funding hit the industry around 2023. As the funds flow dried up, Udaan’s valuation declined nearly 59% from its peak of $3.2 Bn to around $1.3 Bn in its latest Series G round. The $114 Mn round earlier this year brought some relief with some improvement in cash position, but underscored the market’s growing demand for disciplined, margin-focussed execution over blitzscaling.

Founded in 2016 by former Flipkart executives Sujeet Kumar, Amod Malviya, and Vaibhav Gupta, the Bengaluru startup has sought to reinvent itself as a three-layered ecosystem, rather than just a wholesale marketplace. Its logistics arm Udaan Express now powers the supply chain and delivery network, while fintech vertical UdaanCapital offers working capital and invoice financing to retailers. With the acquisition of ShopKirana, Udaan has deepened its presence in retail-tech and last-mile distribution.

These verticals are designed to build an integrated, defensible model that is expected to embed the company more deeply into the everyday operations of India’s small and medium retailers.

“What Udaan is trying to build already exists in a different form. India has a strong dealer and distributor network and most companies sell through dealers, franchisees, or local distributors. So when retailers need goods, they have someone to supply them, at least up to the district level. It’s not a deep network everywhere, but it does exist,” pointed out a former Udaan executive, requesting anonymity because he was no longer working with the company.

Udaan wanted to change this by enabling even the smallest kirana stores to order goods online and have them delivered directly. But, many FMCG companies and vendors didn’t want to work with Udaan because it disrupted their existing dealer network. Parle, for example, still doesn’t work with them as they were uncomfortable losing control over their supply chain, and their distributors didn’t want extra competition either.

Despite muted topline growth, Udaan’s fiscal discipline has started showing early signs of payoff – the FY24 losses are down over 19% through cost optimisation and restructuring. But as India’s B2B ecommerce landscape goes into a shake-up, the challenge for Udaan is clear – can this integrated, capital-heavy model finally deliver sustainable margins in a market where thin spreads and credit risks continue to crush even the most ambitious........

© Inc42