MUMBAI: Reliance Industries (RIL) has acquired 96% of online furniture retailer Urban Ladder Home Decor Solutions for Rs 182 crore, ramping up its hybrid, online-to-offline commerce model and intensifying its fight against Amazon and Walmart-owned Flipkart.
The acquisition was routed through Reliance Retail Ventures, in which foreign investors, including sovereign wealth funds of Saudi Arabia, Singapore and Abu Dhabi, hold about 11% equity. Reliance Retail has the option to acquire the remaining shares (4%) of Urban Ladder and it plans to invest an additional Rs 75 crore in the latter by December 2023.
Incorporated in February 2012, Urban Ladder, founded by Ashish Goel and Rajiv Srivatsa, posted a loss of Rs 50 crore on a turnover of Rs 440 crore in FY20. While Srivatsa had stepped down from the leadership role at Urban Ladder in October 2019 (he has joined venture capital firm Antler as a partner), Goel will continue to be with the company after the ownership changes. The acquisition price suggests that it was a fire sale by Urban Ladder’s shareholders.
The Bengaluru-based furniture retailer had last raised over Rs 700 crore from investors such as Sequoia Capital, SAIF Partners, Steadview and Kalaari Capital. Deepak Shenoy, founder, Capitalmind Wealth, tweeted: Urban Ladder sold to Reliance for (Rs) 182 crore after having raised (Rs) 700 crore. This is actually better than having to shut it down. But distress sale indeed.
The Urban Ladder purchase, said RIL will further enable its digital and new commerce initiatives and widen the bouquet of consumer products provided by it. Urban Ladder also runs a chain of stores in several Indian cities. Couple of months ago, RIL had acquired 60% of online pharmacy retailer Netmeds for Rs 620 crore. Subsequently, it announced the purchase of Future Group’s retail business for Rs 24,713 crore. This deal, however, is mired in a legal dispute with Amazon.
India’s furniture market, of which 86% is unorganised, is pegged at around $17 billion. Of this, online retail accounts for a small portion. It, however, has the potential to reach 8-9% by FY22 from the current 3%, according to research firm Redseer.
Flipkart dominates the online furniture retail sector with a 40% market share, leaving other big players such as Amazon, Pepperfry and Urban Ladder behind. “Digital furniture retail is tough business, especially with consumers taking a long time to come back to the platform for a repeat purchase,” said a senior executive at a large online furniture retail company. “Transporting bulky items like furniture, too, is difficult as it requires a specialized supply chain. Moreover, with the entry of Ikea and the expansion into the category by horizontal players, such as Flipkart and Amazon, the competition got tough and players need deep pockets. Even Fabfurnish, which was bought by Kishore Biyani (of Future Group) from Rocket Internet, couldn’t be kept alive,” he added.
Most online furniture retailers, such as Urban Ladder and Pepperfry, have set up physical stores to provide consumers with a touch-and-feel experience. The segment has also given rise to small players, such as Livspace, Foyr and Homelane that are providing online home interior solution services. The larger players, too, have followed suit.
The Urban Ladder and other retail acquisitions reflect RIL’s bet on the India consumer story as it reduces its dependence on industrial segments. Its consumer-focused businesses — Jio and Reliance Retail — have emerged as significant contributors to its operating profit in recent years.
Source From : Times Of India