Arzooo operations stall amid funding crunch

Two employees said there had been no work for the past 60 days. “In an all-hands call, the management said the first priority for the company was to bring money to the table, but there hasn’t been any communication since then,” one of them said.

The number of employees at the company dropped from about 300 in January 2023 to about 100 in December 2023, according to data research platform Crediwatch. Several laid-off employees told Mint that they hadn’t received their pending salaries or full and final settlement. Some were paid their January salary this month while others were paid 70% of their January salary, according to employees Mint spoke with. “February salary is pending and the company said they will clear all dues by April, but that seems unlikely as HR has stopped responding to mails. Everyone is looking out and moving if they find a good opportunity,” said an employee.

Earlier this year the company announced it had raised an undisclosed sum in an extended Series B funding round. Last year Arzooo secured $70 million at a valuation of about $310 million in a Series B round that had been announced in June 2022. Investors included SBI investment, 3 Lines and Trifecta. Even as the company announced the fundraise, it hadn’t paid its stakeholders or communicated the development to its employees and customers.

According to several current and former employees, the $70 million was supposed to come in tranches. A part of it was to come in late last year, but did not, leading to a funding crunch.

Addressing a detailed questionnaire from Mint, the company said, “Due to the delay in planned fundraise, the company did have a phase where it dealt with a cash tight situation, but with the recent infusions of capital from existing investors and upcoming investment, we are able to deal with it.”

“We’re now excited about starting FY25 as we complete our vertical integration, with the B2B and consumer businesses coming together. We aim to achieve profitability by the first half of the financial year,” it added.

Founded in 2018 by former Flipkart executives Khushnud Khan and Rishi Raj Rathore, Arzooo offers a digital platform for companies to sell consumer durables and electronics to retailers. It also launched a fintech service last year. But while buyers continue placing orders, sellers haven’t been delivering them as the company has blocked their payments. “Customers’ orders are stuck and I am getting calls from them saying their money is not being refunded either,” said an employee.

According to current and former employees, the company has not been deducting tax at source since June 2023. Mint has seen the 26AS form of one employee, which shows TDS entries only until June.

Retail investors who invested in the company through its invoice discounting channel haven’t received their payments either, according to one such investor Mint spoke with. Vendors in invoice discounting lend to companies, particularly startups and SMEs, to ease their working-capital requirements.

Arzooo hasn’t yet filed its FY23 financials. Its revenue increased From ₹259 crore in FY21 to ₹1,117 crore in FY22 and its loss surged from ₹18 crore to ₹63 crore, according to data from Tofler.

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Published: 20 Mar 2024, 11:59 AM IST