Udaan juggernaut rolls on

Firm plans to grab 10-15% of the overall B2B retail market in the next 7 years

Bengaluru-based unicorn Udaan has worked out an aggressive growth plan which entails grabbing 10-15 per cent of the overall B2B retail market in seven years, up from its current share of around 0.3-0.4 per cent.

The B2B market (excluding industrial goods) stands at $780 billion and on an annualised basis, Udaan has already clocked up $2.4 billion in gross merchandising value.

In 2025, the market is expected to cross $1,000 billion. Its plan involves growing its gross merchandise value at 100 per cent annually for the first few years and then at around 60 per cent to reach the huge target.

The company, which raised $280 million in fresh funds just a few days ago (taking the total figure to over $1.15 billion), plans to increase its warehousing fivefold from 10 million square feet to 50 million square feet to achieve its ambition.

It is also planning to double its direct presence from 50 to 100 cities for its food and grocery distribution business in two years. Udaan, which has both a non-food and food category, is already delivering to small retailers in over 12,000 of India’s 15,000 pin codes and covering 900 cities.

Sources in the company say that the new fund raising will be enough for its requirements in the next two years. Moreover, it will be Ipo-ready within the next two to three years.

Udaan’s non-food contribution margin is already in the positive and it expects to see the same in the food delivery business in the next two years. However, sources say that it will take a call on whether to go for profitability - which would mean limiting growth - or continue to expand the business and build volumes.

According to Bofa Global Research, Udaan has hit a valuation of $3.1 billion which puts it at number 10 in the pecking order of the 37 unicorns in the country.

Udaan is already connected with over three million kirana shops out of which half of are active users, distributing a range of products directly from the manufacturers to the retailers. However, it has a large market of around 16 million kirana retailers to reach (total retailers would be around 25 million).

It has over 25,000 sellers on the platform and operates in categories which include lifestyle, electronics, home & kitchen, staples, fruits & vegetables, FMCG, pharma, toys, and general merchandise

The average size of a single transaction on the Udaan platform is around Rs

4,000 which it would like to increase. Sources in the company say that kirana shops and small retailers generally work with 10-12 suppliers for procuring their products and Udaan’s strategy is to get a larger share of that pie.

The B2B consumer player is able to offer better pricing by reducing the various layers in the distribution chain (which means more commissions) and passing on part of the savings to the retailer. However, Udaan is competing with giants such as Jiomart, Amazon, and Metro Cash & Carry which are also targeting small retailers for a share of their business.

Udaan handles transactions of around 8,000 tons of food products daily, making it the largest grocery player in the country.