The business-to-business marketplace Udaan has secured $280 million in funding from both current and new investors, bolstering the Indian startup’s resources as it strives for accelerated expansion and competitive advantage.

This new investment represents an extension of the company’s Series D funding and is not a separate financing round. Having already raised $585 million during its Series D round, and a total of $1.15 billion to date, the Bangalore-based company is now valued at over $3.1 billion, according to a source who shared this information with TechCrunch.

Octahedron Capital and Moonstone Capital are leading this latest funding round, with contributions from existing investors including Lightspeed Venture Partners, DST Global partners, GGV Capital, Altimeter Capital, and Tencent.

A significant portion of India’s business-to-business sector remains fragmented. Consequently, merchants across the country often need to travel to major distribution centers in other cities to replenish their stock. These merchants frequently lack strong negotiating power, making it difficult to secure the best prices and access a comprehensive range of products.

Udaan, established by three former Flipkart leaders, addresses this challenge by directly connecting small retailers with wholesalers and traders. Currently, the platform supports over 3 million retailers and small to medium-sized businesses, and has partnerships with numerous prominent brands such as Coca-Cola, PepsiCo, Boat Lifestyle, Micromax, HP, LG, ITC, HUL, and P&G.

Amod Malviya, a co-founder of Udaan, stated that the COVID-19 pandemic and the resulting nationwide lockdown, along with restrictions on e-commerce businesses, highlighted the crucial role of small businesses and local stores (commonly known as kiranas) within India.

“Udaan is pioneering a unique e-commerce model tailored to the Indian market, having emerged in the last four years as one of the country’s largest e-commerce platforms with a mobile-first approach. This funding will enable us to continue expanding e-commerce access throughout India, leveraging Udaan’s cost-effective model for the core middle India market,” he explained.

Beyond addressing inventory challenges, Udaan also facilitates access to working capital for merchants. Small businesses, particularly local stores, often depend on revenue from current sales to finance their next inventory purchase. Udaan’s platform visibility into merchant activity allows it to assess and provide working capital to those who qualify.

These long-standing issues also represent a substantial opportunity for businesses. Analysts at Bank of America noted in a recent equity research report, obtained by TechCrunch, that the unmet SME credit demand in India is approximately $300-$350 billion, with banks currently meeting over 90% of this demand. A typical digital SME lender focuses on loan sizes of $13,575 to $67,875 (Rs1-5 million) without collateral, with an average term of 12-18 months, and often with support from an ecosystem partner.

“While the potential for growth is significant, and yields are higher, we don’t believe their profitability is substantially better than that of banks, even in the long term. Overall, the return on equity for an average digital SME lender is unlikely to exceed 18% – not a significantly higher figure than a major private bank,” they observed.

Udaan plans to use the new capital to further develop the marketplace, broaden its product and category offerings, enhance its financing options for small businesses, and expand its supply chain network.

Malviya emphasized that this funding “demonstrates the long-term potential for transformative and fundamental value creation that the Udaan platform offers to Indian MSMEs, which are vital job creators and the foundation of our economy and society.” He added that the participation of both existing and new investors underscores the growing recognition within capital markets of the unique characteristics of the Indian market and the opportunities it presents.

Over the past two years, numerous startups and large corporations, including Reliance and Amazon, have begun exploring the business-to-business market in India, a sector currently led by Udaan.

For example, Reliance Retail, India’s largest retail chain serving over 3.5 million customers weekly through nearly 10,000 stores in over 6,500 cities and towns, launched JioMart in late 2019 through a joint venture with its telecom subsidiary, Jio Platforms. By mid-last year, JioMart had established a presence in over 200 Indian cities and towns, although its reach and customer service within those areas still require improvement.

Reliance Retail also has a partnership with Facebook for WhatsApp integration. Facebook, which invested $5.7 billion in Jio Platforms last year, intends to explore various ways to collaborate with Reliance to digitize the nation’s local stores and other small and medium-sized businesses.

JioMart is collaborating with retail shops, providing them with digital point-of-sale systems to facilitate electronic payments. It also enables these shops to source inventory from Reliance Retail and utilize their physical locations as delivery hubs. Currently, the platform primarily focuses on grocery delivery. Goldman Sachs analysts recently estimated that Reliance could become the leading player in online grocery within three years.

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