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Furniture startup Pepperfry mulling a pre-IPO fund raise by year-end

The online furniture retailer may plan an IPO in a year and a half, company CEO told Moneycontrol

May 12, 2017 / 07:23 PM IST

Online furniture marketplace Pepperfry could likely be hitting the road for a pre-IPO fundraise by year end to raise USD 25-30 million as it plans to expand its offline studios, the founder of the company said.

"We might look to take up a pre-IPO round of fundraising...will take a decision and figure out our next steps in the next couple of months and then raise the capital towards the end of the year. It could be between USD 25 to 30 million," said Ambareesh Murty, founder of Pepperfry in an interaction with Moneycontrol.com.

"We don't need capital for working capital needs. So we will use it for investments for expansion...in the areas of more studios being opened," he added.

The company currently has 17 offline studios and would be having 23 by the end of May. These are experience stores where people can come and see the products before they place their orders.

While Murty did not give any definitive timeline for a possible initial public offering (IPO), following the pre-IPO fundraise, he said the company would consider it only towards the end of 2018.

"We haven't yet settled for it yet. But we know we would be in a very good shape to do an IPO in a year and a half from now. We will be ready by then. Then we will decide when we want to go ahead with it," he said.

Pepperfry was founded by former eBay India country manager Murty and former head of eBay Motors Ashish Shah in 2011. The company last raised around USD 31 million in Series E round from existing investors Goldman Sachs, Norwest Venture Partners, Bertelsmann India Investments and Zodius Technology Fund in September.

Recently, it also raised an undisclosed amount of venture debt firm Innoven Capital.

Pepperfry has overall raised USD 167 million. It is significantly high against what its nearest competitor Urban Ladder has raised so far. Urban Ladder last raised USD 15 million from existing investors such as Kalaari Capital, SAIF Partners and Sequoia Capital among others. In total, it has raised over USD 90 million.

Pepperfry posted a loss of Rs 154 crore during the financial year 2016 against Rs 80 crore during the previous financial year. The revenue, however, surged four-fold to Rs 98 crore during FY 2016 against Rs 25 crore during the year-ago period.

Pepperfry runs a marketplace model and claims to be working with around 10,000 merchants. The company takes care of its own last mile delivery and has set up 17 fulfilment centres. It also owns over 400 trucks which are used to deliver the orders. The fulfilment centres are typically located within a 50-kilometre radius of the merchant.

Once the order gets placed on Pepperfry, the order intimation is sent to the seller. He then ships the goods to these fulfilment centres where the packing is done and then sends it for delivery.

"The entire last mile delivery infrastructure for Pepperfry is owned by Pepperfry and outside of this, we work with an extensive network of transporters who ship goods from one city to another. The reason we built out our own supply chain was because there was no supply chain that existed at that time for furniture," said Murty.

As the company grows, it is also considering expanding its logistics business by extending it to third party merchants.

Currently, it delivers products that are ordered through Pepperfry.com. It could then also service orders received by offline merchants.

"It is something that we have been evaluating. It would be a logical extension of what we have been doing. Even today, we get requests from our own furniture merchants to handle the logistics for them. We already have established a relationship with everybody and they also sell offline," Murty said.

"We can pick it (product) up from the merchants' warehouse and deliver it to a customer and I already have a team of carpenters so assembly services are provided by me today," he added.

The company claims to be covering 500 cities currently.

"Logistics business is a very lucrative business if you get your costs under control and you have a strong value proposition," said Murty adding that currently, the logistics cost amounts to 7 percent of the cost of the goods delivered.

"When we started 3 years back, this number used to be 25. We think we have built India's largest big box supply chain. What we have built nobody else has and there is a demand for this through our own market conversations etc," he said.

Pepperfry claims to have an average ticket size of around Rs 13,000.

priyanka.sahay@nw18.com
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first published: May 12, 2017 07:22 pm