Furniture retailer Pepperfry rejigs business structure ahead of $300 million IPO
- ByStartupStory | July 30, 2022
Pepperfry, a furniture retailer, has begun restructuring its company structure in preparation for its initial public offering on India’s stock markets. To begin, the creators, Ambareesh Murty & Ashish Shah, relocated Pepperfry from the Cayman Islands to Mumbai. They registered Pepperfry in the Cayman Islands since the original aim was to have a principal listing in the United States. They later revised their plan since a foreign-registered firm cannot conduct an initial public offering (IPO) in India, as per Indian capital market restrictions.
To comply with local capital market requirements, the partners are also changing the company’s board makeup, bringing in independent directors. If the chairman is an independent director, the board must have 33 percent, independent directors. Pepperfry intends to generate up to $300 million through the sale of new shares as well as a supplementary offering of shares. While the founders are hesitant to sell their shares in the IPO, external investors like Norwest Ventures, Broad Street Assets, Bertelsmann, and General Electric Pension Trust, which own significant positions in Pepperfry, are expected to cash out some of their investments.
However, the amount of stock they may sell through the IPO is limited. A share sale by an investor who owns more than 20% of a firm must not exceed 50% of their pre-issue holding, whereas a share sale by a shareholder who owns less than 20% must not exceed 10% of their pre-issue holding. This year, Pepperfry intends to file a draught IPO prospectus with capital markets supervisor Sebi. It has so far secured $285 million in debt and equity capital to fund its expansion plans.
“Pepperfry is well-capitalized and on its way to profitability,” cofounder Shah remarked. It last raised $40 million in debt in November 2021 and managed to reduce operational losses by 60percent to Rs37 crore in FY 2021. The operational losses in fiscal 2020 were Rs 95 crore. Murty and Shah, who previously worked for eBay, established Pepperfry in 2011 as just a player in fashion and leisure items before expanding into furniture sales. Pepperfry is now the biggest furniture retailer in the country, with approximately 200 outlets. During the fiscal year ended June 2022, it shipped 9.8 lakh packages.
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