On Saturday, Reliance Industries Ltd (RIL) told stock exchanges that its subsidiary Reliance Retail Ventures Ltd. (RRVL) had acquired a 96% share in Urban Ladder through an all-cash transaction for Rs 182 crore ($ 24 million). The deal, which closed after protracted negotiations over several months, provides RRVL with the option to further enhance its stake to 100%. The oil-to- telecom conglomerate said it would invest an additional Rs 75 crore in Urban Ladder by December 2023.
“ On an average, top tier investment firms including Sequoia Capital, Elevation Capital (formerly SAIF Partners), Steadview Capital and Kalaari Capital have been able to recover only a fifth of their invested capital in Urban Ladder, following its sale to Reliance Retail,” said the people cited above.
Founded in2012 by Ashish Goel and Rajiv Srivatsa, the furniture portal had raised a total of about Rs 860 crore ($115 million) in venture funding and was last valued at over Rs 1,200 crore ($160 million).
“The sale is at about 20 cents to a dollar raised," said one investor on the condition of anonymity. The RRVL acquisition valued at about $24 million is a “ distress” sale, investors told ET.
“The founding team, including CEO Goel, is likely to stay back for a year to help with the transition," said another person aware of the details.
Email queries sent to Sequoia, Elevation Capital, Kalaari Capital and Steadview did not elicit a response until press time. Urban Ladder did not offer comment.
The deal underscores the rising appetite for buyouts of Indian startups by the Mukesh Ambani -led conglomerate that acquired e-pharmacy venture NetMeds in August.
For Urban Ladder, the outcome is being regarded as an unfortunate ending as the seven-year-old furniture portal was once viewed as a top vertical ecommerce site, having raised a record $ 50 million in 2015. But business had soured for the company, as larger players including Amazon and Flipkart launched private label furniture brands and other niche vertical ecommerce rivals proliferated. Urban Ladder reported a net loss of Rs 49 crore on its total turnover of Rs 434 crore in fiscal year 2019.
Stung by the competition, Urban Ladder was looking to raise fresh capital and explored sale options with strategic investors for over a year such as FabIndia, Flipkart and Amazon, sources said. But as the talks failed to fructify, the company had to restructure its business to cut costs in order to stay afloat, the people said.
In October 2019, cofounder Srivatsa left the company, the exit of Kalaari Capital’s Vani Kola from the board of the company.
The startup also moved towards a lower cost price point to stay competitive, laid off a fourth of its workforce, and shut down high-cost initiatives such as cash-on-delivery, and operations in several cities, CEO Goel had told ET in an earlier interaction. He had declined to comment on the sale talks.
Competition in India’s online furniture market has risen in recent years following big investments in the space by Flipkart and Amazon and the entry of global furniture brand IKEA. This has led to increased discounting, significantly hurting margins of brands and vertical players.
"With 90% of the furniture industry still unorganized in India and leading business houses like Reliance showing strong interest in this domain shows that there is high potential in this space and there is big gap which needs to fill in a more organized way," said Lokendra Ranawat, CEO, WoodenStreet. The deal will deepen the competition in the sector, he said.
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10 Comments on this Story
Antony Raj Raj108 days ago
Like FAANG , India may have BRIHT- Baj Fin, Reliance, Infy, HDFC and TCS and RIL and TCS will surpass FAANG. Hope companies like Amaazon does not obstruct the growth of Indian companies
Gurmeet Sawhney108 days ago
Best for both.At least investors and other stake holders may get their investment back.
Bhavan Kataria108 days ago
Khooda (feku) maherbaan to gadha pahelwan !