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Exclusive: Urban Ladder looks for buyer at lower valuation; top VCs may have to take haircut

Its proposed valuation of about Rs 200 crore is only a fraction of the capital it has raised -- over Rs 700 crore from top venture capital funds.

July 07, 2020 / 07:27 AM IST

Online furniture retailer Urban Ladder is looking to sell the company at a valuation of about Rs 200 crore, barely a sixth of its valuation two years ago, as it fights for survival, said three people aware of the matter, requesting anonymity.

Urban Ladder has appointed investment bank IndigoEdge to advise on its sale, after a tumultuous 2019 where a co-founder and board member both left the company, and it had to lay off people, even before the COVID-19 pandemic hit the industry at large.

Founded by Ashish Goel and Rajiv Srivatsa in 2012, Urban Ladder sells furniture, decor, and mattresses via an inventory-led model, while it earlier also ran as a marketplace. Though it saw early success and customer traction, it had to keep raising funds to prop up growth in a competitive market where Swedish giant IKEA also entered in 2018.

Over the past year, it has held conversations with a number of strategic investors -- mainly online retailer Flipkart, for a possible acquisition, but talks did not go through last year. Other suitors included fashion brand Fabindia, interior design startup Livspace, and earlier this year, online mattress retailer WakeFit. However, a deal with any of these players is still not finalised and in some cases unlikely to go through.

At its peak in January 2018, Urban Ladder was valued at over Rs 1200 crore, which came down to about Rs 750 crore (a little over $110 million) in 2019, a year where it also laid off 90 employees, or 25 percent of its workforce, sources said.

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Its proposed valuation of about Rs 200 crore is also a fraction of the capital it has raised -- over Rs 700 crore from top venture capital funds such as Sequoia Capital, SAIF Partners, Kalaari Capital and hedge fund Steadview Capital. Some investors may have to thus take a major haircut in order to secure an exit and for the company to survive, the people cited above added.

Urban Ladder CEO Ashish Goel said, "We are not looking for a buyer at this point." Flipkart and Fabindia did not respond to emails seeking comment, while WakeFit and IndigoEdge declined to comment.

Co-founder Rajiv Srivatsa left the company in October last year, while Vani Kola, managing director of Kalaari Capital, also stepped down from the company’s board during the same period. Srivatsa is currently India head of Antler, a Singapore-based venture capital fund.

For FY19, Urban Ladder said it made a profit of Rs 50 crore while nearly doubling revenues to Rs 298 crore. However, the profits were on a one-time adjustment in the balance sheet even though unit economics did improve somewhat.

For February 2020, just before the COVID-19 pandemic hit India, Urban Ladder had a revenue of about Rs 15-20 crore. Like all businesses, it suffered from the pandemic too, with no delivery of products and shops closed for weeks, followed by a delay in products and servicing. It also has about Rs 40 crore of debt on its books -- funds it had borrowed from a non-bank lender and venture debt firm Trifecta Capital.

“Urban Ladder has a great brand despite all its board turmoil and co-founder leaving, and a product that customers like. So it should be able to find a buyer in some conglomerate or any company which has deep pockets and has a long term view on the furniture and online space,” said a person close to the company, requesting anonymity as the discussions are private.
M. Sriram
first published: Jul 7, 2020 07:27 am

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