Zomato’s launch of IPO in the Indian stock market, paved the path for several startups belonging to different business verticals to debut in it. There was an air of excitement in the Dalal Street since, the stock market this time welcomed an online food aggregator platform’s IPO launch, which was one of its kind.
Following Zomato’s suit, Pepperfry – an online furniture marketplace plans to file for an initial public offering (IPO) in June 2022, and complete the pre-IPO funding round by the end of this year.
Like many other businesses, the wrath of the subsequent lockdowns and pandemic was no stranger to Pepperfry. With most corporates adapting to a virtual workforce, it expected a bleak in its business but to its surprise, profits and sales began flowing with the recent virtual lifestyle making the furniture company inch closer to its IPO launch and unicorn dream.
The IPO dream and profitability in the pandemic
Any company to launch its IPO needs to give consistent profits. SEBI ( Securities and Exchange Board of India) expects companies to have a track record of profits distributed for three out of the immediately preceding five years.
The profitability of Pepperfry resulted due to an increased demand for chairs, laptop tables, study tables as the makeshift offices and schools at home began growing. Its chair sales grew by 250 percent y-o-y and study table sales grew by 400 percent in August 2020, thereby contributing 25 percent to its overall sales.
Also, the shift in consumer behaviour from offline to online purchases, resulted in Pepperfry’s online purchases locking profits upto 120 percent of pre-lockdown levels by Aug-Sept 2020. The online furniture marketplace also witnessed first-time buyers that were more in numbers than the repeat buyers from Tier-2 cities.
Besides furniture, consumers these days are spending a significant time indoors and are thereby demanding mattresses, cushions, and bean bags that deliver adequate comfort while resting, sleeping, and working. Catering to this new behaviour, Pepperfry launched its mattress brand Clouddio that began contributing around 35 percent to its overall business just after its 6-month launch.
Pepperfry – an online furniture marketplace plans to file for an initial public offering (IPO) in June 2022, and complete the pre-IPO funding round by the end of this year.
The technology leverage and expansion plan of Pepperfry
Leveraging the AR and VR capabilities on its app and stores will be easing the shopping of furniture online for the new age customers by giving them an idea of how a product will look in their homes. After experiencing the products at the stores, customers can order online. Once customers can visualise the products using VR and benefit from it, will elevate their confidence in Pepperfry’s offerings thus driving its sales.
Moreover, Pepperfry is changing its approach to modular business by standardising the customer experience at its new modular centres in cities of Hyderabad, Bengaluru, and Mumbai, etc. The online furniture marketplace has plans to build 200 offline studios based on the FOFO model ( Franchise owned, franchise-operated) to penetrate into Tier-II and Tier-III cities in India.
Investing in Pepperfry’s IPO – a good deal for investors?
Whether investing in Pepperfry’s IPO will be lucrative or not is too early to say since the IPO is to be launched in June 2022. The company is largely focussing on growth and ramping up its offline presence by expanding its experiential stores in metros and smaller cities. The online furniture company registered a 26 percent increase in revenue to Rs 260.6 crore and has trimmed losses by 33 percent to Rs 122 crore in 2019-20. But, here investors need to take cognisance of the business vertical they are operating in.
Against the overall furniture sales that touched $700 million in 2019-20 the online furniture purchase had less than 3 percent share according to RedSeer Consulting. In addition to this, furniture purchase online is largely a metro consumer phenomenon and in India, it is largely an unorganised market, people yet like to purchase it from local carpenters. Although, Pepperfry has ambitious expansion plans to cover small Indian cities and can drive sales if hiring and employment increases since furniture is a non-essential category. There can be green shoots for the Pepperfry if offices again open up since India has now reached the 100 crore vaccination mark.