Peak XV-backed Log9 retrenches over 115 contractual staff, delays salaries

With fresh capital inflow expected, the company aims to settle outstanding payments and also prepare for future purchases necessary for expanding battery pack production. (Image: Company website)
With fresh capital inflow expected, the company aims to settle outstanding payments and also prepare for future purchases necessary for expanding battery pack production. (Image: Company website)

Summary

  • The company says it is preparing for fresh funding and will make an announcement in two weeks

Nanotechnology startup Log9 Materials has retrenched over 115 contractual workers at its Bengaluru factory and delayed January salaries to employees and vendor payments, according to multiple people aware of the matter.

Pankaj Sharma, co-founder, Log9 Materials, confirmed that the company has let go of about 115 contractual workers as it put more automated systems in place. Currently, there are about 180 contractual workers at the factory.

Though Sharma said it is business as usual for the company, its earnings tell a different story. The firm's losses widened to 89 crore in FY23 from 16 crore in FY22, according to data platform Kredible. Its revenue increased to 74.43 crore in FY23 from 25.51 crore a year ago.

The Bengaluru-based startup manufactures lithium-ion cells for electric vehicles and is backed by investors like Peak XV’s Surge, Exfinity Venture, Amara Raja Batteries and Malaysia's Petronas.

Sharma said that the company installed automation lines in its factory which were commissioned around December and hence there was some reduction. “Within the first one and a half, two weeks, we placed about 60% of those members that were requested to step out…What my team tells me is that by and large, most of the people have already been placed," he said.

An employee at the company said he had received only 50% of his salary for January on 17 February. “There has been no mail communication but the founders had come to office and communicated that salary disruptions will continue for the next six months," said this person.

 “There has been some salary disruption but it doesn't have to be a six-month kind of a thing because I think we've already solved that particular question and we are finishing up the paperwork for a fresh funding that we're receiving right now, and you will hear from us in, maybe, two weeks," Sharma said.

He said it’s not a runway problem for the company but more about liquidity. “So there were some specific payments that we had planned for. And we said, okay, fine, let's get that payment done first," Sharma said, adding there are certain salary brackets in which disruption has happened. 

Salaries for people who are in the lower bracket have been taken care of, he said, and added that pending salaries will be cleared within 10 days.

As for the communication on salary disruptions, he said, it was to give the company a breather in case the investors take long to convert. “At the same time, since December, the conversations went on pretty well, and then finally, the investors converted and the term sheet came and we signed that up."

Without disclosing the size of the funding, he said the new round will see three new investors coming on board.

Sharma also said the company has a runway of about 12 months now. He said the company needs to invest more in the expansion of battery pack production, and automation line and hence it has been cash-conservative over the last three-four months.

While acknowledging there has been a delay in payments to some vendors, he said “Generally, every month we are buying material ao there is a constant steady state of payments and purchase. This time there was disruption because with the automated manufacturing line, now we have to first train people to get into manufacturing."

“So we said we have enough material or wherever I don't have, I will buy it a limited amount, as there's a transition that's happening from people to machines. That started the first level of disruption."

"Typically what they say is, you can buy today, you can pay me in, let's say, two months, but now they said, since you're not pulling anything more, please pay me everything that is in your credit cycle," he said.

The company has started making part payments to vendors to avoid blocking other capital payments, according to Sharma. “We've been in touch with the vendors. 50-70% of vendors have already received money and the last 30-40% of payments may be pending." 

With fresh capital inflow expected, the company aims to settle outstanding payments and also prepare for future purchases necessary for expanding battery pack production, Sharma added.

 

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
more

MINT SPECIALS

Switch to the Mint app for fast and personalized news - Get App