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BENGALURU : Business-to-business e-commerce firm Udaan has raised $280 million from new investors Moonstone Capital Partners and Octahedron Capital, besides existing investors Lightspeed Venture Partners, DST Global, GGV Capital, Altimeter Capital and Tencent Holdings, the company said on Wednesday. The funding round valued it at a shade over $3 billion, a person familiar with the matter said on condition of anonymity.

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Udaan had raised $585 million from a clutch of investors in October 2019, valuing the e-commerce B2B firm at $2.5-2.8 billion. Udaan was founded in 2016 and turned a unicorn within two years. The current fund-raise is a follow-on round from the 2019 round and with this, Udaan has raised about $1.15 billion so far.

The company said it will use the funds for creating a B2B e-commerce market in India and reach out to more small businesses. Udaan will invest in expanding products and categories on its platform, improve user experience, enhance technology and help small and medium enterprises develop financing capabilities, and reinforce supply-chain infrastructure. The fund-raise comes at a time when e-commerce majors like Walmart-owned Flipkart, Amazon and Reliance JioMart are digitizing kiranas and MSMEs, and boosting their B2B play to take advantage of India’s consumer base. Flipkart launched its digital B2B marketplace Flipkart Wholesale last September.

“Covid-19 has accelerated the already fast digital-led evolution of the highly fragmented and unorganized Indian trade and retail industry. The pandemic also highlighted the unique structure of the Indian economy, with millions of kiranas and neighbourhood stores becoming the lifeline of our country at the time of a crisis. Udaan is at the forefront of this uniquely Indian e-commerce opportunity. This financing enables us to further our journey of taking e-commerce to the depth and breadth of the country, with Udaan’s unique low-cost model for core middle India," said Amod Malviya, co-founder, Udaan.

Despite the pandemic, greater digitization of the retail and wholesale supply chains is likely to outlast the crisis and trigger faster expansion of the e-B2B sector. Udaan connects brands and manufacturers with small retailers across food, non-food (electronics and fashion) and pharmaceuticals categories.

Online B2B platforms have witnessed rapid growth in recent years but still form a minuscule part of the market. However, the covid-19 crisis saw retailers and brands moving to B2B platforms, where orders could be placed regardless of lockdowns, and they offered demand predictability and an assurance of delivery of goods across cities and states. Udaan’s food category in B2B e-commerce soared last year, with transaction volumes crossing 8,000 tonnes per day. Its foods business, which constitutes around 60% of its business, comprises fast-moving consumer goods (FMCG), staples and fresh products.

Udaan has witnessed over 500% in volume for the food business in the last two years, with the vertical adding over 50% buyers in the in the past six months during the pandemic. It has also witnessed a significant increase in repeat purchase from these buyers.

Malviya said, “Participation of existing and new investors in this financing highlights the increasing recognition of capital markets of this unique nature of the Indian market, and the opportunity it offers."

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