Pepperfry rejigs structure for IPO

(This story originally appeared in on Jul 29, 2022)

Mumbai: Furniture retailer Pepperfry has begun to overhaul its business structure as it plans to debut on India’s stock exchanges.

To start with, the founders Ambareesh Murty and Ashish Shah have redomiciled Pepperfry from Cayman Islands to Mumbai. They had registered Pepperfry in Cayman Islands as the earlier plan was to establish a primary listing in the US. Subsequently, they changed their strategy as, according to Indian capital market regulations, a foreign-registered company cannot do an initial public offering (IPO) here.

The partners are also shaping the company’s board composition, roping in independent directors, to meet local capital market laws. Rules require the board to be made up of 33% independent directors, if its chairman is an independent director.

Pepperfry seeks to raise as much as $300 million via sale of new stock as well as a secondary offering of shares. While the founders are not keen on offloading their shares in the IPO, external investors such as Norwest Ventures, Broad Street Investments, Bertelsmann and General Electric Pension Trust, which hold large stakes in Pepperfry, are likely to encash a portion of their investments.

However, there’s a cap on the quantum of stake they can sell through the IPO. Rules state that a share sale by investors who own more than 20% in a company should not exceed over 50% of their pre-issue holding, while that of shareholders holding less than 20% should not go beyond 10% of their pre-issue holding.

Pepperfry plans to file a draft IPO prospectus with capital markets regulator Sebi this year. It has so far raised $285 million through equity and debt to finance its growth ambitions. “Pepperfry is well-capitalised and on the path to achieving profitability,” said co-founder Shah. It had last raised a debt of $40 million in November 2021 and had managed to narrow its operational losses by 60% to Rs 37 crore in fiscal 2021. In fiscal 2020, operational losses was Rs 95 crore.

Murty and Shah, who met while working for eBay, established Pepperfry in 2011 as a fashion and lifestyle products player before foraying into furniture retailing. Today, Pepperfry, with a presence of nearly 200 stores in the country, is the largest furniture retailer. It had despatched 9.8 lakh shipments during the 12 months ending June 2022.