Mumbai | Bengaluru: Global creditors of IPO-bound Udaan, including banks and hedge funds, have initiated insolvency proceedings in the Singapore High Court after its offshore holding company Trustroot Internet Pvt Ltd defaulted on $170 million compulsorily convertible notes or bonds due on June 30, according to people aware of the development. The creditors have hired Alvarez and Marshal as the official liquidator in the bankruptcy proceedings. The unravelling of another homegrown unicorn in the process of an India listing underscores the fault lines that have emerged in the private credit markets.Since its launch in FY25, Udaan has incurred an estimated cumulative loss of around Rs 13,000 crore.Bengaluru-headquartered Udaan, backed by Silicon Valley venture capital firm Lightspeed Ventures along with DST Global and Tencent, is a 10-year-old business-to-business (B2B) ecommerce company that was founded in 2016 by former Flipkart executives Vaibhav Gupta, Sujeet Kumar and Amod Malviya.The company told ET that the India entities of Udaan remain insulated from the legal challenges.However, in the weeks preceding the latest developments in Singapore, several other lenders including JP Morgan, HSBC, DBS and Axis Bank withdrew working capital lines to the company, exacerbating the crisis.The holdco issuer needed to pay $170-200 million to bondholders by June end to settle the maturing notes, including the redemption premium. With mounting losses and a near 70% drop in the company's equity valuation, creditors in recent weeks refused to accept terms for a debt-restructuring plan that the firm and its advisors were negotiating seeking extension of the repayment schedule.The maturity had no cure period but the bondholders were willing to extend the repayment timeline if the company closed a new fundraising.Heavy Hitters Creditors include Tor Investment Management, Samena Capital, Arena Investors, Catalyst Funds and Evolution as well a unit of Japanese investment bank Nomura and a credit fund affiliated to Standard Chartered Bank, among others. They had appointed PJT Partners and law firms Akin Gump Strauss Hauer & Feld and Wong Partnership as advisors to help negotiate with the company once concerns arose that Udaan would fail to pay up by the maturity date. The company is being advised by Houlihan Lokey and Kirkland & Ellis LLP on the debt restructuring.“The creditors have been trying to iron out a debt restructuring package with the company for weeks but eventually failed to reach a consensus on the amount to be paid upfront,” said one of the persons. “On Tuesday, they have initiated a bankruptcy process by filing a winding up petition.”As per the original agreement, the convertible instruments would have been turned into shares of Udaan’s Indian entity if it had listed by now. In 2025, the company secured the National Company Law Tribunal (NCLT) approval to consolidate its technology, logistics and wholesale trading units under a single entity, Hiveloop Ecommerce. Singapore-registered Trustroot was to be reverse merged into the India-domiciled entity as part of this exercise ahead of the IPO.Gupta, who is also the company’s CEO, told ET in March that the IPO timeline was nine to 18 months away.“There are two workstreams. First, getting the business to break even, which we expect by mid-next year. Second is the (IPO) process. We consolidated our business units in India last year. Now we are working on the Singapore-to-India reverse merger,” he had said.Equity RaiseUdaan has also been working with Goldman Sachs for a $150-200 million equity capital raise but for a company that has never been ebitda positive, attracting new external investors at rich valuations has been a challenge. Udaan’s FY25 revenue was down 20% year-on-year at Rs 4,561 crore and net loss narrowed by 37% to Rs 1,055 crore. It is yet to file FY26 financials. Investors are said to have valued the company at around $800 million to $1 billion, 50% lower than the previous funding round in June 2025.ET reported May 25 that the company was in talks to raise $50-60 million as top-up funding from existing investors M&G Prudential and Lightspeed Venture Partners. The round closed last month. In parallel, it has also been trying to raise a $40 million facility from financial institutions like BlackRock by pledging shares. According to Tracxn, the company has raised nearly $2 billion across multiple debt and equity rounds. Its peak valuation was $3.2 billion in 2021.India Insulated“The matter is related to ongoing restructuring negotiations and offshore proceedings among offshore stakeholders at the offshore holding company level,” said an Udaan spokesperson. “These discussions have no bearing on our operating entities in India, where our teams employ our people and run the day-to-day business. Udaan and UdaanCapital continue to operate as usual, serving customers across trade commerce and supply chain financing. We will continue to focus on delivering value to our customers, partners, employees and stakeholders.”Akin and Nomura didn’t respond to queries. Tor Investments couldn’t be reached on the phone.Business FundamentalsThe B2B ecommerce company operates in categories such as FMCG, staples, fruits and vegetables and pharmaceuticals. It buys items in bulk and sells to small retailers. Since 2022, Kumar and Malviya have withdrawn from the company’s day-to-day operations. Kumar still holds a board position, while Malviya has started Pre6, an AI-powered manufacturing firm.Lightspeed is the single-largest shareholder, at about 33%, having deployed $917 million so far, as per Tracxn data. DST Global and M&G together own another 15.3% while the three founders hold 12.5% all told.Udaan started with the goal of digitally disrupting India’s well-entrenched retail supply chain. Its founders borrowed the customer acquisition playbook of horizontal ecommerce marketplaces, offering deep discounts to attract retailers. However, a large part of India’s trader ecosystem has shown little interest in giving up longstanding relationships with offline distributors. Udaan’s strategy of competing across multiple product categories also failed to deliver the desired results. In contrast, its B2B commerce peers focused on specific domains and built deep expertise over time. Jumbotail, for instance, concentrated on staples, while Ninjakart carved out a niche in fresh fruits and vegetables.In March, Gupta had also said that revenue shrank on account of exits from certain verticals in non-essential categories such as lifestyle, general merchandise, and home and kitchen, while increasing focus on groceries and essential items. Between FY24 and FY26, it shrunk operations to 16 cities from 80. “At its peak in 2021-22, Udaan operated in more than 1,000 cities across India,” said Gupta.Byju's and PharmEasy (API Holdings) are among Indian former unicorns that have faced a reckoning over debt while planning for IPOs in India.