CredR delays payroll, halts operations amid fundraiser

CredR delays payroll, halts operations amid fundraiser

2024-10-28 15:59:57 :

CredR, a two-wheeler marketplace backed by Omidyar Network and Eight Roads Ventures, has postponed its September payroll and temporarily halted operations as it seeks $20 million in funding. Employees and people familiar with the matter said the disruptions raised concerns about impending closures Mint.

Two employees who spoke on condition of anonymity confirmed the salary delays and said CredR’s offices had been closed for more than two weeks.

On October 11, the company notified employees that the office would be closed until October 20 and the vacation schedule would be adjusted in line with the Diwali holiday. An employee previously quoted added that the closure was later extended to October 27, but the office did not reopen on October 28 as planned, and staff did not receive communication from management regarding the revised schedule.

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Another employee said the variable portion of their salary had been withheld for several months. “Our emails since the 21st asking about work and payment status have not received a reply,” he said.

fundraising push

CredR co-founder Sasidhar Nandigam confirmed that September salaries have been deferred as part of a strategy to conserve cash flow. “We have been dependent on operations since the last two months due to seasonal factors. We have just increased wages to ensure that the cash flow is healthy for us,” Nandigam told Mint.

The company is actively seeking a new round of funding in excess of $20 million, but Nandigam did not disclose further details about investors or valuation. CredR has raised $40 million to date and is currently valued at $28 million, according to Tracxn.

Nandigam added that the company’s backup plan depends on timely completion of regulatory filings. “Funding has been secured and we are processing regulatory filings. Given there are four consecutive bank holidays this week, all this should be resolved within a week,” he said.

He attributed the closure of offices, stores and warehouses over the past two weeks to preparations for product launches. “Whenever we launch a product, we pause operations for 2-3 weeks to allow for a smooth migration, depending on the number of stakeholders involved, and then restart operations,” he explains.

While Nandigam did not reveal specific details about the product, he said it was at the heart of the company’s pitch to new investors. He added that the current funding round was initially expected to close in May, but was delayed due to its equity adjustment.

“My shareholding ratio was 2.5%, and it was only increased to 5% in December last year. New investors want me to have a higher shareholding.” He said. Nandigam’s stake is below 0.1% as of 2022, according to Tracxn.

Existing investors Omdiyar Network, Eight Roads Ventures and Yamaha did not respond. MintRequest for comment.

Founded in 2015 by IIT Bombay alumni Sumit Chhazed, Nikhil Jain and Nittin Mittal, CredR initially focused on the sale of used two-wheelers. According to their LinkedIn profiles, all three founders have left the company. Nandigam joined as co-founder in 2019.

“This is the second time this has happened. Around July 2022, we faced another disruption where the company had to vacate its office space in Pune. We had to work from open spaces like CredR stores, cars and walkways About four months,” said the second employee mentioned earlier.

The company’s latest financing $Yamaha Motor has secured 1,617 crore rupees ($2 million) in funding through convertible debt in 2022, but it’s unclear how long CredR has been seeking fresh capital.

The challenges facing CredR reflect broader struggles in the industry. Direct competitor Beepcart has also laid off more than 100 employees since the beginning of 2024. Bigger players in the used car market, such as Spinny and Cars24, are struggling with huge losses, underscoring the financial pressure on the industry.

Shrinking finances and workforce

CredR’s revenue grew from $22 Crores in FY22 $According to Traxcn, it will reach Rs 34 crore in fiscal 2023. The company has not yet disclosed its fiscal 2024 financials.

The workforce has shrunk significantly over the past five years – from about 1,000 employees to less than 100 today. Nandigam acknowledged that 70-80 employees were laid off in March, but stressed that severance packages were provided and that no forced resignations occurred.

Bhaskar Majumdar, managing partner at Unicorn India Ventures, said wage arrears are becoming increasingly common among startups facing liquidity challenges. “If there is revenue, companies can explore traditional avenues like invoice discounting. But if they rely solely on equity from investors, that becomes a problem,” Majumdar points out.

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Raghav Dhoot, founder of Avyay Advisors, added that the salary issues faced by CredR mirror trends among early-stage and more mature startups. “If delays persist, employees have the right to serve a formal notice and, if the situation remains unresolved, they can seek legal remedies, such as filing a civil lawsuit,” Dutt said.

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