A Strong, sustainable future ahead of Pepperfry Presented to Mr. Murty & Mr. Shah By Smurfit Consulting David Madigan Monika Ghita Geoff O’Brien Weiran He

To achieve IPO of INR132 billion in 2022 Your challenge To achieve IPO of INR132 billion in 2022

Our recommendations Grow GMV through House Brands Sales 1 Grow GMV through House Brands Sales 2 Finance partnership with Bank of Mumbai 3 Expand to 70 studios by 2020 (Franchise 90% - 10% Own) Grow GMV through House Brands Sales

Agenda External and internal analysis Alternatives and recommendations Geoff O’Brien Alternatives and recommendations Monika Ghita Implementation plan David Madigan

David Madigan Monika Ghita Geoff O’Brien Analysis Geoff O’Brien

The Indian Furniture Market Furniture Market to grow from $25bn to $35bn Online Furniture Market at $700m – will grow Indian Demographics – Aspiring post-millennial Modern young market 25m – 30m and growing Increasingly organized furniture market Pepperfry must capture the growing online market Key message

Competitors – Online Indian Furniture Pepperfry IKEA Indian Offline Online Horizontal Brand Resources Reach Technology Good Medium Bad Pepperfry must lead the online furniture marketplace

Pepperfry Capabilities and Resources Brand Recognition of Pepperfry – 75% organic traffic Excellent Distribution system – 2% breakage, 92% 1st time delivery, NPS 60 Supplier system is deep with strong relationships Marketplace is leading furniture portal in India House Brand gives greater profitability and is 50% of GMV Credible investors raised USD$195m Must grow demand on house brands Key message

Pepperfry Financial Analysis Pepperfry must grow demand to achieve profitability and IPO.

David Madigan Monika Ghita Geoff O’Brien Recommendation Monika Ghita

Your aim is to achieve INR 50m GMV by 2020. At present this target is not achievable until 2021; Pepperfry will not become profitable until 2027.

Strategies Considered Create a Home Buyer Ecosystem 2. Pepperfry Rental Platform Create a new market – new customer acquisition Achieve more GMV Participate in the shared economy trend 3. Grow GMV through House Brands Sales Partner with bank of Mumbai to provide customer financing Grow sales though highly profitable home brand sales Expand studios to promote home brand sales (Franchise 90% - 10% Own) House Search Finance Sourcing Legal Advice Home Design Furniture Purchase The best option for growth is through option 3 - house brands

Alternative strategies Home Buyer Ecosystem Pepperfry Rental Platform Grow House Brand Sales Consistent with Mission, Vision & values Consistent with Core Capabilities Size of the Opportunity Cost of Implementation Ease of Feasibility Good Medium Bad Leverage core competencies – quality furniture and distribution network

Recommendation: Grow GMV through House Brands Sales Partnership with Bank of Mumbai Grow sales though highly profitable house brand sales Expand to 70 studio by 2020 (Franchise 90% - 10% Own) Provide financing to customers Customer loyalty credit card offering Digital marketing TV advertising Experience studios Franchise 20 out of 27 own studios Establish 26 additional franchise studios by 2020 Introduce augmented reality googles in studios Grow GMV and become profitable in order to IPO in 2022

Through this strategy you will achieve profitability and IPO valuation of INR 132billion in 2022.

David Madigan Monika Ghita Geoff O’Brien implementation David Madigan

1. Implementation: Customer Financing Bank Partner Bank of Mumbai (BoM) Deal construct Embed customer financing tool on marketplace paid by BoM Commission agreement with BoM paying Pepperfry Balance sheet sits with BoM Typical asset financing rates are 8-10% with net interest margin of 8-10% Create loyalty credit card which is Pepperfry branded with BoM Partnership discussion timeline 1 month head of terms agreement 6 months negotiation 12 months rollout

2. Implementation: Driving House Brand Sales Marketing Channels Physical Stores Product Placement Priority on Marketplace TV advertising focused on House Brands Increase Content marketing for better SEO by: Blogging (featured posts) Video posts Social media posts (#Pepperfry) Sponsor Cricket Team Increasing franchise commission to 12% on House Brands from 10% In owned stores prominent product placement

3. Implementation: Franchise Studio Expansion Owned Studios Franchised Studios 70 Total studios by 2020 7 63 Replicate McDonalds franchise model of 90:10 franchise / owner Lower capital expenditure versus owned stores Develop case studies for entrepreneurs Leverage local knowledge advantage Hire head of franchises (costing $140k) Hire 6 employees responsible for each franchise studio (10 studios per employee) Leverage Augmented Reality technology in stores via Microsoft Hololens to drive customer experience

IPO Timeframe IPO involves 4 key steps to achieve INR 132bn Appoint Investment Bank to be the main bookrunner Develop IPO prospectus Begin IPO Roadshow IPO at a valuation of INR 132 bn 2019 2020 2021 2022 IPO involves 4 key steps to achieve INR 132bn

IPO Timeframe PAT Multiple of 20x on 2021 generates a valuation of INR 132 bn

Risks and Contingencies Higher Loss Experience in furniture sales Difficulties finding franchisees Franchise model doesn’t work Contingencies Tighten requirements on customers (proof of income, extra collateral) Sponsor franchise night courses in local colleges and illustrate benefits via case studies Make sure it is economical and manage quality of people

A Strong, sustainable future ahead of Pepperfry David Madigan Monika Ghita Geoff O’Brien Weiran He By Smurfit Consulting