Pepperfry co-founder gets candid about its IPO plans, says profitability is right around the corner
- Ashish Shah, co-founder and COO of Pepperfry, in an interview with Business Insider shares that the startup turned its business around in 2020 and is now close to profitability.
- Shah shared that in 12-16 months the initial public offering (IPO) dream will become a reality.
- Pepperfry is also currently hiring for their technology and product management teams.
AdvertisementIndian online furniture marketplace Pepperfry saw its business, like many other businesses across the world, come to a complete halt in March 2020. A year later, Ashish Shah, co-founder and chief operating officer at Pepperfry in an interview with Business Insider shared that the startup has turned its business around and is now close to profitability, while a market listing is on the cards.
Eyes on the market
Pepperfry has been on the radar for an initial public offering (IPO) for a long time now. Shah shares that in the next 12-16 months the IPO dream will become a reality, but he admits that it's all about the timing. If the pandemic would not have happened, Shah said that by now they would have been close to filing for the IPO.
“From the process standpoint, we began our IPO preparation six months ago. Last year, we did an IPO day at Pepperfry, most of our documentation is ready and we are moving fast as long as processes are concerned,” said Shah.
In order to go for an IPO, they need to show profitability and the idea for Shah is to turn profitable and then remain so. India’s market regulator Securities and Exchange Board of India (SEBI) expects companies to have a track record of distributable profits for three out of the immediately preceding 5 years.
“Profitability is the agenda we drove significantly during the months of lockdown – from simplifying team structures, supply chain pricing with the customers to our relationships with the merchants, we did a lot of optimisation. Beginning of this year, we were very close to profitability,” said Shah.
However, Shah stresses that there weren’t any layoffs at Pepperfry, even though salary cuts had to happen. “When we say that we have to be profitable, we want sustainable profitability. By laying off people for two, three months, we could have turned profitable, but the idea is to do it the right way,” he said.
While Pepperfry has no plans to raise funds immediately, they will raise a pre-IPO round to build awareness around the brand. “Somewhere around the third or fourth quarter this year is when we will look at raising funds,” he said.
Work from home orders
As the pandemic forced people to work from their homes, the need for chairs, tables and furniture that will help you work from home shot up massively. And for the folks at Pepperfry, this didn’t go unnoticed. By the end of May and June onwards, orders started coming in for chairs, study tables, laptop stands and more.
Advertisement“Chair sales grew 250% year-on-year, study tables grew by 400%. Some of these categories that used to contribute 10% to my business pre-pandemic, now contribute almost 25%,” said Shah.
The company now claims a return rate of less than 4% and revenue is also growing. With the end of the financial year ended March 31, Shah expects the firm would have clocked 35% growth in revenue. “In the coming year, we are targeting a 50-60% growth rate,” he said.
Hiring and expansion plans
Shah said that they are doubling their technology team as they are opening a technology centre in Bengaluru. The roles they are looking at are for their technology and product management teams.
Pepperfry is now also looking at focusing more on the franchise model for expansion. “We opened 10 franchises in the last quarter, and we are looking at 10 more this quarter. In the next six months, we will have 25 more stores through the franchise model,” he said.
The importance of the entry of Reliance and IKEA
Shah shares that the furniture category is a $30 billion market according to him, but only as much as 9% is held by organised players. So, the concept of branded furniture is important in India. Even though Pepperfry sees competition from Reliance-acquired Urban Ladder or IKEA, Shah believes they are only going to help boost the sales of branded furniture.
However, there’s a race. “There can be many billion dollar companies in the furniture market because the sector is so big, but we want to be the first,” said Shah.
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