Kapruka eyes bigger slice of SL’s budding e-commerce space following IPO

By Nishel Fernando 
Sri Lanka’s homegrown e-commerce platform Kapruka Holdings Limited aims to spread its wings to multiple business verticals in the country’s growing e-commerce space, with the proceeds from its upcoming initial public offering (IPO) on the Colombo Stock Exchange (CSE), which is scheduled to open tomorrow (22). 

Kapruka is expecting to raise Rs.505.5 million via the IPO, offering a 20 percent stake in the company, priced at Rs.15.40 a piece, at a forward PER of 10.0x and Acuity Partners (Pvt.) Ltd has been appointed as the manager to the issuance.

Speaking at an investor conference held in  Colombo recently, Kapruka Founder Chairman Dulith Herath outlined the future investment plans of the company, which include setting up of a premier marketplace platform for well-established brick and mortar shops, a used-goods marketplace under the sub-brand of soldout.lk, Kapruka Wholesale Marketplace and expanding its cross-border exports.

Kapruka plans to invest Rs.200 million of the expected IPO proceeds in the premier marketplace platform Kapruka Partner Central, which would be similar to the popular business model of Fulfilment by Amazon (FBA).
This platform is expected to connect buyers and sellers and allow the sellers to choose multiple order fulfilment options, including fulfilment by Kapruka.

Herath noted that the proposed platform would differentiate itself from other marketplaces in the country by handling the storage at the seller’s premises, pick up and packing, islandwide delivery, returns, exchanges and exceptional customer service, all under one solution. 

The investment of the IPO proceeds is expected to commence in 2Q2022 and the development is expected to be completed by 2Q2024. 

Kapruka is also planning to launch a used goods marketplace as a fully-owned new sub-brand—Soldout.lk, with Rs.50 million investment from the IPO proceeds, as it has identified active secondary markets for automobiles and property in the country.  

The e-commerce platform for pre-owned goods aims to connect buyers and sellers with added features such as home delivery and order fulfilment.

Herath pointed out that there aren’t organised platforms to trade pre-owned goods in the country at the moment. Meanwhile, Kapruka also plans to invest Rs.55.5 million of the IPO proceeds in the proposed Kapruka Wholesale Marketplace. Grocery would be the primary category  of the platform, with plans to expand to fruit and vegetable wholesales.

Kapruka plans to commence investments into the proposed platform under Kapruka E-commerce (Pvt.) Limited in 1Q2023 and the development is expected to be completed by 1Q2024.

In addition, Kapruka plans to increase the scale of volumes and operations of its cross-border exports after having already established itself on global e-commerce platforms such as Amazon.com and eBay.com to sell Sri Lankan brands to international markets.

In addition to local brands, Kapruka also plans to sell private label Kapruka-branded Ceylon Cinnamon on these global platforms.  

The cross-border operation comes under the group’s fully-owned subsidiary Kapruka E-commerce (Pvt.) Limited. Kapruka also plans to invest Rs.100 million of the IPO proceeds in recruiting new staff, inventory acquisition and enhancing the storage and supply chain to Western markets over a two-year horizon, starting from the first quarter of 2022.

Further, the company plans to invest Rs.100 million of the proceeds from the IPO on upgrading the existing technologies and infrastructure.

Kapruka recently completed a major restructuring exercise, ahead of the IPO, bringing Techroot (Pvt.) Limited and Kapruka Productions (Pvt.) Limited under Kapruka Holdings Limited as fully-owned subsidiaries. The company also acquired 25 percent of Kapruka Global Shop (Pvt.) Limited while the balance 75 percent shareholding of the newly associated company is owned by Dulith Herath and  A. Herath.

Currently, 100 percent stake of Kapruka Holdings is owned by its Chairman Dulith Herath and his stake is expected to reduce to 80 percent following the IPO