Leading online furniture retailer shelves public listing plans after engaging bankers, aims to reignite revenue growth and trim losses in current fiscal year
Introduction:
Online furniture and home goods major Pepperfry has put its initial public offering (IPO) on the back burner in order to zero in on accelerating growth and achieving profitability, founder and CEO Ashish Shah told The Economic Times. The Mumbai-based startup, which had been gearing up to go public since early 2022, will instead prioritize boosting its top line by 10-15% in the current financial year ending March 2024.
“We have postponed our IPO plans for the time being. There are other important areas to focus on in the business,” Shah said. “From a cost standpoint, we are strong. Therefore, we are focusing on growth now. We aim to go slow but get solid growth, which is also profitable. If we can continue this growth for 8-10 months, we will be IPO-ready.”
Founded in 2012 by Shah and the late Ambareesh Murty, Pepperfry had engaged investment bankers over the past year to pursue a public market debut, aiming to raise $250-300 million. In May 2022, the company converted into a public entity, signaling its IPO intentions. However, a slowdown in discretionary consumer spending resulted in tepid revenue growth in fiscal 2023, prompting Pepperfry to re-strategize.
For the financial year ended March 2023, Pepperfry posted revenue of Rs 272.3 crore, a marginal increase from Rs 247 crore the previous year. Net losses narrowed slightly to Rs 187.6 crore, compared to Rs 194 crore in fiscal 2022. With a continued emphasis on profitability, Shah noted that the company has managed to slash its cash burn by a third versus last year.
“All our actions on costs are done and we have a very sorted financial architecture now,” Shah explained. “With 10-15% growth we will hit profitability. Further, we have been optimising our studios to drive business growth. Compared to last year our studios are driving 15% more business growth today.”
Industry experts believe Pepperfry’s decision to delay its IPO is a prudent move given the challenging market conditions and investor sentiment. “Focusing on the fundamentals of growth and profitability is the right approach in the current environment,” said Anshul Gupta, Senior Research Director at Gartner. “Pepperfry can look to tap the public markets once it establishes a clear path to profitability and demonstrates sustained growth momentum.”
Conclusion:
The online home decor market in India is projected to reach $5.4 billion by 2025, presenting a massive opportunity for players like Pepperfry. With close to $300 million in funding from backers such as Goldman Sachs and Bertelsmann India, the startup is well-capitalized to navigate near-term headwinds and emerge stronger.
As Pepperfry knuckles down to rejuvenate growth and inch closer to profitability, its IPO ambitions have been put on hold. The coming fiscal year will be crucial for the furniture retailer to prove its business model and set the stage for an eventual public market foray, as it competes in India’s burgeoning online home decor space.
