“We have established a fairly clear leadership for ourselves in the segment and now is the time for us to start bringing in margin structures more in line with a business that is turning profitable,” Murty told Business Standard.
Started in 2011, Pepperfry competes with Urban Ladder, horizontal players like Flipkart and Amazon, and furniture rental firms such as Furlenco and RentoMojo.
“Over the next six months, we would look to raise primary capital in the company of about $20-30 million, effectively for growth and expanding our logistics footprint and experience studios,” said Murty.
“And then, pre-IPO, we may have a secondary round to provide exits to some of our existing investors,” he said.
Usually, just before the IPO, companies
get a new set of investors in a largely secondary share-sale to provide exits to some of the earliest investors. This round typically happens around six months prior to the IPO.
Pepperfry is planning a public float in the next 14-18 months.
The furniture company has so far raised around $200 million in equity funding from players such as Norwest Venture Partners, Bertelsmann India Investments, Zodius Capital and Goldman Sachs. In its more recent round in March last year, it had raised Rs 250 crore from US-based investor State Street Global Advisors.
Urban Ladder, its main rival, is backed by Kalaari Capital, SAIF Partners, Sequoia and Steadview Capital.
In terms of sales, Pepperfry is the largest player in the online furniture segment.
However, in the last two years, Amazon and Flipkart have heavily increased focus on the furniture category, while global major Ikea has also selectively started online commerce.
Add this, the rise of rental players, including Furlenco and RentoMojo, is also nudging furniture buyers towards renting.
“We see all these developments as good for the category. It helps grow the category and gives customers more choices. All these names you mentioned are an indication that the furniture market is large enough and required a certain degree of organisation. As a marketplace, we don’t think of them (other players) as competition but as potential merchants who will sell on Pepperfry at some point,” said Murty.
About three-fourths of PepperFry’s products are on the marketplace model, while the remaining are private labels. On the marketplace side, over a hundred brands like Home Town, At Home, Neelkamal and Durian sell on PepperFry. The company has also maintained a sharp focus on its own labels, which fetch higher margins. Since launching the first one in 2013, PepperFry now has 10 private labels across furniture, differentiated by styles and make.
PepperFry also runs experience studios across 65 locations covering 25 cities. In 2018, the company made significant investments in improving logistics network and also its stores. “Experience centres gives us a high RoI (return on investment) in the sense that we are able to track customers who have been to the store and then bought on PepperFry.com. That way, each stores gives us 10-15 times the rental amount every month,” he added.