The dues average around ₹3 lakh per vendor for a period of nearly six months
The firm has also announced pay cuts for its employees, stopped hiring in the past month and may layoff staff
Gurugram-based home rental startup ZiffyHomes, backed by startup accelerator Y Combinator, has deferred payments of several vendors and are yet to pay for their leased properties amid the covid-19 crisis, according to multiple people aware of the development. These dues average around ₹3 lakh per vendor for a period of nearly six months.
The firm has also announced pay cuts for its employees, stopped hiring in the past month and may layoff people in the coming week, according to employees, raising questions about the survival of the startup.
Three vendors said the company founders have informed them that ZiffyHomes might file for bankruptcy, which may further disrupt payments that are due.
Several landlords have also pulled back their properties from the platform, citing non-payment as a reason.
“It is uncertain if ZiffyHomes will survive the current scenario created by covid-19. The liability of the company (including vendor payments and statutory liability) is much greater than the cash available in the bank. The company’s future is uncertain," said an employee, on condition of anonymity.
“From the house owners' perspective, our contracts are renegotiated on a profit-sharing basis, there is no minimum guarantee on rentals, a clause that will not be available going forward. Definitely, on the financial side, we are seeing a 30% decline in business, which is much less compared to the hotel and resort industry," said Sanchal Ranjan, CEO and co-founder ZiffyHomes.
In a recent email to a vendor, the company said it has witnessed 80-85% decline in business and is not able to generate any cash flows. The startup is now pushing its vendors to accept 15% of the outstanding payment due, as a final settlement and issue a no-objection certificate for the remaining amount, according to the same email.
Mint reviewed a copy of the email sent to the vendors.
“...The founders and the team have been stating that the company is looking for bankruptcy protection and forcing vendors to accept 10% of the total payment due (to the vendors). We have been chasing them for months now and have six-month worth of payments deferred amounting to more than ₹6 lakhs. The company should provide for these payments and immediately clear dues immediately," said one of the vendors, providing services to ZiffyHomes, who didn’t want to be named.
Ranjan said there is definitely a delay in payments because they are renegotiating the contracts.
The covid-19 outbreak and the lockdown also led to ZiffyHomes announcing pay cuts for its employees over the last month.
"We have frozen hiring for new roles. Those who have been given an offer by ZiffyHomes prior to lockdown, we have honored those jobs. From the salaries perspective, there is no standard pay cut, we are cutting salaries depending on how much money each employee is earning on a range of 10-20% on pay cuts. We have not furloughed any staff," Ranjan said.
The employee quoted above said that the staff has undergone massive salary cuts, up to 50%, and the company is starting to lay off employees over the next few weeks.
According to a second employee, the startup at present has liabilities mounting to more than ₹4 crore.
“The company hasn’t been receiving calls or replying to mails for the last one month on the payments due. Most of their properties have been running empty, and now some vendors are planning to come together and file a lawsuit against the company," said another vendor, who provides electronic appliances and furnishings to Ziffyhomes.
He also confirmed that his furnishings are stuck in these properties as landlords have locked these places and pulled out of the platform.
Founded in May 2015 by Sanchal Ranjan and Saurabh Kumar, ZiffyHomes provides users with ready-to-move-in homes.
Being a part of Y Combinator’s summer batch of 2018, the company has also acquired other home-rental startups, including Fella Homes and Nivaasa.
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