Udaan raises another $35 million from EvolutionX via convertible notes and debt

The latest funding comes close on the heels of Udaan raising
$120 million through convertible notes and debt from existing shareholders and bondholders in October.
ET had first reported that this deal was in the works in its October 12 edition.

“With this round, the total funds raised by Udaan through convertible notes and debt in the last four quarters has crossed $350 million, making it one of the largest structured instrument fundraises in the country,” Udaan chief financial officer Aditya Pande had said in an internal note last month, after it closed the $120 million financing.

“The efficiency enhancement and structural cost-optimisation initiatives we undertook last year are showing results. After achieving positive unit economics in the previous quarter, we have witnessed robust growth in business during the last two quarters, said Vaibhav Gupta, cofounder, and chief executive of Udaan.
“We will continue to invest in technology to enhance customer experience and scale further; build additional capabilities to tap the potential of the Kirana ecommerce market, and deploy capital in areas that will drive our future growth and profitability,” he added.

Earlier this month, EvolutionX announced its maiden investment in India with a similar debt deal in API Holdings, the parent of digital healthcare platform PharmEasy.

Discover the stories of your interest

“We continue to focus on our strategy to provide an alternative source of debt financing for technology companies. We believe Udaan’s business model holds immense growth potential while keeping technological innovation at its forefront,” said Rahul Shah, partner, and co-head of investments in India and Southeast Asia at EvolutionX,

Tapping debt and convertible notes

Shah said that while venture debt has become a growing asset class in India, there is a clear gap in the growth debt space and EvolutionX is aiming to bridge it.

“We (EvolutionX) have committed approximately $85 million (Rs 680 crore) in this quarter to category-leading technology companies led by promising founders and reputed investors,” he said.

ETtech had reported on October 12 that
late-stage startups are opting for convertible notes for new capital amid the funding drought in big-ticket deals. For Udaan, this is the second such capital infusion this year.

These notes, which will convert into equity at a later date, require no valuation to be ascribed to the startup currently. With desired valuations not coming their way, startups are resorting to these debt instruments to tide over the economic whiplash, with cautious investors demanding better unit economics and a path to profitability.

ET had reported in October that
online pharmacy startup PharmEasy had kicked off its rights issue to raise up to Rs 750 crore through convertible notes.

The company’s existing investors, including Prosus Ventures, Temasek and its founders, have subscribed to the share issue, worth about Rs 200 crore, recent regulatory documents sourced from business intelligence platform Tofler showed. Prosus Ventures and Temasek had subscribed to convertibles worth nearly Rs 100 crore and 90 crore, respectively.