Pepperfry Considers Company Sale Amid Stagnant Sales Performance: Report

• ByStartupStory     |    September 16, 2024

Pepperfry, the omnichannel furniture retailing startup backed by Norwest Venture Partners, has engaged Ambit to identify potential buyers as the company grapples with stagnating sales and persistent financial losses, According to Moneycontrol.

The startup, which has been operational for 12 years, is exploring options for a strategic acquisition or finding a buyer if the terms are favorable. The move comes as the company’s revenue growth has plateaued and losses have remained steady over the past four years, prompting investors to seek an exit strategy.

“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 sources said. Discussions are ongoing, but no single buyer has been identified yet.

Pepperfry’s financial woes are compounded by the failed attempt at an initial public offering (IPO) and the recent death of its co-founder and former CEO Ambareesh Murty in August 2023. Murty was seen as a pivotal force behind the company’s growth.

Pepperfry, which competes with industry giants such as Reliance-owned Urban Ladder, Swedish giant IKEA, Peak XV-backed Wakefit, and Westbridge-funded Wooden Street, has struggled to maintain growth in a competitive market where achieving profitability remains challenging.

Data from Tracxn shows that Pepperfry’s revenue grew from Rs 207 crore in FY19 to Rs 290 crore by the end of FY23, reflecting a compound annual growth rate (CAGR) of nearly 10 percent over four years. This modest growth has been insufficient for venture capitalists accustomed to more substantial returns, especially given the company’s ongoing losses of around Rs 180-190 crore annually.

The startup is yet to file its FY24 results, which will provide the latest update on its financial performance. Despite its last valuation of approximately $330 million, Pepperfry sought a valuation of around $200-220 million in recent discussions with potential buyers. This valuation, however, has been deemed excessive given the company’s current financial metrics.

“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,” a second source told Moneycontrol.

Potential buyers include paint companies such as Nerolac, Berger Paints, Birla Opus, and Asian Paints, which are diversifying their revenue streams and expanding into home services. Livspace, a larger rival, could also be interested in acquiring Pepperfry to strengthen its market position. Additionally, B2B companies like Infra.Market, which operates a house of brands including home makeover solutions firm IVAS Homes and cement companies like RDC, may also consider acquiring Pepperfry as it seeks to expand its multi-category product brand.

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