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How Pepperfry expects to push sales and get IPO ready without increasing cash burn

23 June, 2017

Mumbai-based e-commerce marketplace for furniture, home decor and appliances Pepperfry.com is expecting to achieve profitability within 15 months after which it would consider a public listing, a top company executive told VCCircle.

TrendSutra Platform Services Pvt. Ltd, which runs Pepperfry.com, started working on franchise models last month to fuel growth in non-metro cities and is likely to raise about $25-30 million in a year to fund its expansion plan, said founder and CEO Ambareesh Murthy.

“Before finalising the listing plan, we need to ensure that our business generates enough cash flow to meet our expenses and help us turn profitable. We are expecting to invest $10-15 million to enhance our retail presence and for other capital expenditure,” he said.

Murthy said the firm has already set up around 20 studio centres and plans to establish another 50 centres which would be a combination of company-owned centres and franchisee-owned ones. “Since our products belong to high-involvement categories, customers need multiple touchpoints before they decide to buy the product. These experience centres would enable customers to touch and feel the products before placing the order,” he said.

The firm aims to achieve profitability within 15 months though its loss doubled last year. According to Murthy, its loss rose as its advertising spend surged last year. “In Mumbai, outdoor campaigns cost Rs 80 lakh to Rs 1 crore a month which is almost similar to the cost of establishing a single store. Such stores are expected to bring a lot of business that would stablise expenses while revenues continue to grow. Our revenues have grown at a 75% CAGR in the last three years,” Murthy said.

The company reported revenues of Rs 98 crore as of 31 March 2016, compared with Rs 25 crore in the same period the previous year. However, its loss rose to Rs 154 crore in FY2015-16, compared with Rs 88 crore in the year-ago period, according to VCCEdge, the data research platform of VCCircle.

Pepperfry has around 20,000 stock keeping units (SKUs) with a gross margin of 47%, Murthy said. The firm gets 62% of the traffic among 24 online furniture sites, he claimed. The firm has 18 fulfilment centres serving customers in 500 cities, supported by 480 employees, 1,000 contract staff, 10,000 merchants and a fleet of 400 vehicles.

According to media reports, the firm initially planned to acquire companies with an investment of $10 million to fuel growth. Murthy noted that it was actively looking to acquire firms in the augmented reality and virtual reality space a year ago. However, it has later developed those technologies in house. The firm would consider future acquisitions in technologies that are accretive to its existing business.

Funding
Pepperfry has raised around $167 million through multiple rounds, becoming one of the highly funded firms in the space. Its peer Urban Ladder Home Décor Solutions Pvt. Ltd raised $90 million since 2012.

In September 2016, the firm raised Rs 210 crore ($31.3 million) from existing investors including Goldman Sachs, Zodius Technology Fund, Norwest Venture Partners and Bertelsmann India Investments, the strategic investment arm of the international media firm Bertelsmann in India.

In July 2015, it secured $100 million from Goldman Sachs and Zodius Technology Fund. Its existing investors Norwest Venture Partners and Bertelsmann India Investments also participated in the round.

In May 2014, it raised Rs 95 crore ($16 million) in a round led by Bertelsmann India Investments. Norwest Venture Partners also participated in the round.

It had raised Rs 67 crore from Norwest Venture Partners in previous rounds of funding.

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How Pepperfry expects to push sales and get IPO ready without increasing cash burn

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