Udaan - Episode 1

The whole is more than the sum of its parts – Aristotle

Hey there!

Thanks for stopping by.

Now that you are here allow me to introduce you to Mr. Goyal. He has a clothing shop just nearby my house. A few years back, when I visited his shop, he said – Beta ‘you can pay using Paytm and google pay’ I smiled and said, wow, uncle!

Today, I visited there again; he seemed worried as he wanted to expand but was unsure from where he could source goods. I told him to check out Udaan.

Back to business!

Why should you know about Udaan?

Udaan joined the coveted Unicorn Club within three years of starting its operations, making it the fastest-growing startup. They have some unique strategies which help them to stand out. So let’s begin.

UDAAN – EPISODE 1

Udaan is a B2B e-commerce firm that connects retailers and wholesalers with different manufacturers. It offers a horizontal marketplace, facilitating access to a variety of product markets. But unlike its competitors, it’s not only a typical tech aggregator but also provides logistics and credit services.

You might wonder why Credit?

A snapshot of B2B businesses indicates that in India the majority of it runs on credit to fulfill the needs of working capital. Credit is at the core of medium and small businesses in India.

Remember the Aatmanirbhar stimulus package to reboot India’s MSME sector where the government has decided to provide Rs. 3 lakh crores in loans to MSMEs aimed at providing additional working capital to existing customers of banks and NBFCs.

Yes, the same problem!!

The Three Magical Ingredients!

The tech integrates the market for retailers and wholesalers, logistics resolves the issues of What to the source, Where to source, and How to source, credit enables them to grow.

But banks have an NPA problem, right? So how Udaan can lend and escape the same problem?

Seeing this as an opportunity rather than a problem, Udaan enabled a credit facility on their platform. Unlike B2C setup, retailers are running businesses, and their reputation matters a lot on the platform. Even single malpractice can cost them dearly. It will damage their reputation in front of all the suppliers associated with Udaan. After gaining some trust, Udaan starts lending worth Rs 10,000 to Rs 5,00,000 to retailers and wholesalers.

The beauty of the process is that Udaan NPAs are amazingly low.

The Yummy Platter!

You might think the mainstream revenue generator for Udaan is through commissions on the sales transactions happening through its platform.

But guess what, that is not the case.

Apart from commission, a significant portion of the revenue also comes from their credit facilities and logistics. Traditionally, the retailers end up financing their credit from local lenders and end up paying large interest rates. But, Udaan took the initiative and provided the loan to them with cost-effective interest rates, i.e., 10-15%. Udaan has acquired an NBFC license in November 2018, which allowed them to disburse the loans directly to its retailers and sellers and removed the dependency on third-party NBFCs.