Norwest Venture Partners-backed Pepperfry, the omnichannel furniture retailing startup, has appointed Ambit to find a buyer amid flatlining sales, several people aware of the developments told Moneycontrol.
The mandate is to look for a potential buyer or even a strategic acquisition by a larger player if the deal terms are favourable, as the going gets tough for the 12-year-old company, sources said.
“The company’s revenue has stagnated and its losses have also not reduced over the past four years or so, which has forced investors to look for an alternative route and find a strategic buyer that will give them an exit,” one of the persons cited above said. The company has not zeroed in on a single buyer yet but discussions are ongoing, the person added.
Pepperfry is exploring a sale after attempts at an initial public offering (IPO) failed. The talks come at a time when the company has weathered the demise of its co-founder and former CEO Ambareesh Murty in August 2023. Murty was largely seen as the driving force behind the startup and had scaled the company over the past years.
Pepperfry and Ambit did not reply to Moneycontrol’s queries.
Stalling growth
Growth has been a challenge for Pepperfry, which competes with players such as Reliance-owned Urban Ladder, Swedish giant IKEA, Peak XV-backed Wakefit and Westbridge-funded Wooden Street in a highly competitive market where profitability has been a challenge.
Pepperfry clocked revenue of Rs 207 crore in FY19 but could only grow its top line to Rs 290 crore by the end of FY23, data from Tracxn, a private markets data provider, shows.
A compound annual growth rate (CAGR) of nearly 10 percent in four years (or a 40 percent growth in four years) is inadequate for venture capitalists who are accustomed to exponential growth, especially in the case of loss-making startups.
During the period, Pepperfry’s losses stayed at around Rs 180-190 crore a year. The startup is yet to file its FY24 results, which would give the latest account of its financial performance.
Pepperfry’s continued losses come at a time when many startups have slashed burn, as they look to extend their runway amid a tough funding environment.
Pepperfry was last valued at around $330 million but sought a valuation of around $200-220 million when it engaged with potential buyers in the past few months, a second person who was in discussion with the company for a potential deal told Moneycontrol.
“Pepperfry, which is a marketplace, wanted a multiple on their gross merchandise value (GMV), which was around Rs 900-1,000 crore. Its revenue is, however, in the Rs 270-300 crore range. So, Pepperfry asking for a valuation of around Rs 1,600-1,800 crore ($200-220 million) made no sense to any of us,” the person said.
Asked about potential buyers, four people cited above said paint companies such as Nerolac, Berger Paints, Birla Opus and Asian Paints – all of which are looking to diversify revenue streams – could likely consider a deal like Pepperfry because they are expanding into home services. A larger rival like Livspace could also look at acquiring Pepperfry to consolidate its position in the market.
Similarly, a B2B company such as Infra.Market, which has built a house of brands, which includes home makeover solutions firm IVAS Homes, cement companies like RDC, paint companies like Shalimar Paints and others, may also consider buying out Pepperfry as it aims to emerge as a multi-category product brand.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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