A major development shook India’s new-age furniture marketplace last week. Once hailed as the poster child of online furniture retail, Pepperfry is being acquired in what appears to be a distress sale. Small-cap real estate services company TCC Concept has signed a definitive agreement to acquire Pepperfry.

Although the financial details have not been divulged, industry insiders and people familiar with the matter told Inc42 that the deal could be valued between INR 800 Cr and INR 1,000 Cr, implying a 66% erosion from Pepperfry’s peak valuation of $350 Mn (INR 3,100 Cr). Another insider, however, sees the deal being locked at under INR 500 Cr.

Interestingly, TCC Concept’s current market capitalisation stands at $200 Mn.

Now, what makes the development even more dramatic is that Pepperfry was poised to go public in 2023. That bold plan has faded into oblivion.

So, behind this change of fortunes, what internal decay eroded the company from the inside out? Let’s find out…

No Hold On Manufacturing, Fundamentals

Pepperfry had been looking for a potential buyer for a while. Last year, it even appointed an investment banker, Ambit, to identify acquisition opportunities amid stagnating sales.

Inc42 learnt from sources that Pepperfry approached both traditional and new-age furniture players to get acquired, but the talks could not be walked through. Reason: Pepperfry’s flat revenues and shaky fundamentals.

“There are many structural and fundamental issues at the company — dwindling sales, high cash burn, poor unit economics, and overdependence on commodity designs (standardised, easily replicable, and widely available) and costly offline studios. But the core challenge is its lack of control over inventory,” an insider pointed out, requesting anonymity.

Launched in 2011, Pepperfry enabled independent sellers to list their products, just as in a marketplace model. It followed this commission-based model until 2018. This period also helped it raise most of its total $300 Mn funding.

Under the marketplace model, Pepperfry, at the outset, would earn a 15%-20% commission, while also handling logistics and customer support.

To improve its margins, Pepperfry forayed into private labels around 2019, creating its own branded furniture lines and mattresses. However, instead of setting up in-house manufacturing, the startup imported engineered wood........

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