1. 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

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

3. Our recommendations Grow GMV through House Brands Sales1
Grow GMV through House Brands Sales 2
Finance partnership with Bank of Mumbai 3
Expand to 70 studios by (Franchise 90% - 10% Own)
Grow GMV through House Brands Sales

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

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

6. 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

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

8. 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

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

10. David Madigan
Monika Ghita
Geoff O’Brien
Recommendation
Monika Ghita

11. 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.

12. Strategies Considered
Create a Home Buyer Ecosystem
Pepperfry Rental Platform
Create a new market – new customer acquisition
Achieve more GMV
Participate in the shared economy trend
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

13. 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

14. 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 (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

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

16. David Madigan
Monika Ghita
Geoff O’Brien
implementation
David Madigan

17. 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

18. 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

19. 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

20. 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

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

22. 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

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