Pepperfry, a leading online furniture retailer in India, has roped in investment bank Ambit to explore an exit as the firm remains stuck and incurs increasing losses. Since its inception in 2012, Pepperfry had raised around $250 million from some of the prominent investors, including Norwest Venture Partners and Goldman Sachs. However, the past couple of years have been pretty challenging.
According to data from Tracxn, Pepperfry’s revenue stands at ₹207 crore in FY19 and went up to merely ₹290 crore by FY23 with a CAGR of around 10%. There has not been enough growth in Pepperfry, a cause of concern while the company continues to face annual losses between ₹180-190 crore. The investors, therefore, seek an exit through other means.
The company had planned an IPO, but with all that has been happening lately, things were turning all murky after the death of co-founder and former CEO Ambareesh Murty. The company was believed to be one of the only spearheads behind the company’s growth, and his death has come as a real concern for issues that are related to succession in leadership.
With Ambit, Pepperfry reportedly is in discussions with a buyer, though no deals have been sealed yet. Apparently, several companies are in the fray. Foremost among these are companies operating within the paint and home services industry, which includes Asian Paints, Berger Paints, Nerolac, Birla Opus, and many more. Those companies see it as a tremendous opportunity for increasing revenue streams and for the entry into home solutions upgrading.
For example, companies like Livspace can take an opportunity to acquire Pepperfry to increase their market dominance. On the other hand, the B2B companies like Infra.Market may think that adding the brand of Pepperfry to its portfolio is a good idea.
Valuation concerns, however, are going to haunt the process. Pepperfry is reportedly gunning for a valuation between $200-220 million, much lower than its last valuation of $330 million. Bidders seem to have a skepticism in justifying this price against gross merchandise value at ₹900-1,000 crore plus relatively low revenue of ₹270-300 crore.
The competitive landscape further complicates things. Pepperfry will have to battle it out with big giants like Urban Ladder, IKEA, Wakefit, and Wooden Street, each exploiting their unique strengths in order to garner market share. The Indian furniture market has also seen tremendous consolidation leading to a rather challenging environment for smaller players.
As Pepperfry moves forward with its strategic alternatives, the company needs to achieve profitability and get back in good books with investors. Whether through sale or re-focusing on operational efficiency, Pepperfry’s next moves will be critical, determining what the future holds for this once-thriving startup and in the broader Indian furniture retail market.
