Updated: November 15, 2020 6:27:03 pm
Reliance Retail also has the option to acquire the remaining stake, bringing its stake to 100% of UrbanLadder’s capital stock. (File photo / PTI)
Reliance Industries Ltd’s subsidiary, Reliance Retail Ventures Ltd, has purchased a 96% stake in online home decor company UrbanLadder for Rs 182.12 million. This is the company’s fourth acquisition this year after Coimbatore-based Kannan Departmental Store in March, and the assets of e-pharmacy Netmeds and Future Retail in August.
What are the details of the deal?
Reliance Retail has purchased the 96% stake in Bengaluru-based UrbanLadder from its existing investors including Sequoia Capital India, Kalaari Capital, and Steadview Capital, who have cumulatively invested around $ 115 million (around Rs 700-750 crore ) since the company’s launch in 2012. This represents a significant reduction in UrbanLadder’s valuation, which was second only to its Pepperfry in the online furniture segment. Reliance Retail also has the option to acquire the remaining stake, bringing its stake to 100% of UrbanLadder’s capital stock. He said that he would invest over Rs 75 crore in UrbanLadder, and this additional investment is expected to be completed by December 2023.
What does the agreement mean for Reliance Retail?
The deal contributes to Reliance’s plans to build a stronger retail portfolio to support its e-commerce game. According to the company, acquisitions like these enable the group’s new commercial and digital initiatives and expand the range of consumer products provided by the group, while improving user engagement and experience across all of its retail offerings. With its existing portfolio of digital services including telecommunications, electronic payments, online commerce, content streaming, etc., these acquisitions open the doors for vertical integration of services that experts believe would allow Reliance to keep a client within your own ecosystem for everything you consume. online. The deal also gives Reliance Retail access to a growing online furniture retailer, which has seen its turnover grow almost 10 times in three years to Rs 434 crore for the 2018-19 financial year. 📣 Express Explained is now on Telegram
What does the agreement mean for UrbanLadder?
During 2018-19, UrbanLadder reported a profit of Rs 49 crore, the first since its inception in 2012. This was preceded by net losses of Rs 118.66 crore and Rs 457.97 crore in 2017-18 and 2016-17, respectively. The acquisition means that the company can now stop worrying about financing to finance its losses. According to sources, for now, the company will continue to operate as a separate brand within the Reliance ecosystem with CEO and co-founder Ashish Goel continuing to hold his position for the time being.
How is the online furniture retail market set up?
The growth in online furniture retailing was effectively the result of work by two companies, Pepperfry and UrbanLadder, and industry experts predicted that these companies, along with smaller ones, would grow even more as urbanization increased. and Internet penetration in India. However, with the success of the omnichannel model, in which online platforms began setting up brick-and-mortar stores to address the ‘touch and feel’ problem in furniture e-tailing, traditional furniture companies such as Nilkamal and Godrej soon began to consolidate its position, in terms of the gross value of the merchandise, using the same model. This set a stage where online furniture platforms would appear attractive to mainstream companies in the furniture segment as a plugin.
In 2016, Kishore Biyani’s Future Group acquired the online furniture company FabFurnish and a year later, it completely absorbed the company and the brand ceased operations. In February this year, chemical manufacturer Pidilite Industries invested $ 40 million in Pepperfry, which counts Goldman Sachs, Bertelsmann India Investments, among its main investors. Regarding the investment in Pepperfry, Pidilite Industries CFO Pradip Menon said: “Having a stake obviously means that we will have a very close collaboration with these platforms and therefore we will bring that knowledge to our organization and that they can To form part of the strategy, the market moves gradually, although in a very small way, to a kind of platform in which the ready-to-make furniture, etc., becomes more popular. ”.
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