Kapruka plans Rs.505mn IPO offering 20% stake

• Share priced at Rs.15.40; IPO expected in December 

Sri Lanka’s leading e-commerce platform Kapruka Holdings Limited is planning to raise Rs.505.5 million via an Initial Public Offering (IPO) on the Colombo Stock Exchange (CSE) offering 20 percent stake in the company within this year. An ordinary voting share of the company is priced at Rs.15.40 at a forward PER of 10.0x. Kapruka along with its manager to the issuance, Acuity Partners (Pvt) Ltd., expects to open the proposed IPO in December this year. 

Founded in 2003, Kapruka.com remains as the largest  ecommerce platform catering to Sri Lankan expats living abroad, with a 1.1 million expat customer base. The company has also expanded its geographical footprint to the U.S., United Kingdom (UK), Australia and India, while becoming the designated e-retailer for Sri Lankan products in Amazon, eBay, eTsy and Walmart.

Kapruka offers access to 135,000 products partnering with over 300 popular brands while capitalising on backward and forward integration with its own brand portfolio.

The company reported post tax profit of Rs.44 million on Rs. 964 million revenue for financial year (FY) 2020/2021. In the first quarter of the current FY, it posted an earning of Rs.53 million on Rs.374 million revenue and the company expects Rs.205 million in after tax profit on  Rs. 1.5 billion revenue at the end of the FY.

Currently, 57 percent of Kapruka’s revenue originates outside the country, reflecting the orders placed by expatriate Sri Lankans on the platform, who send gifts and other items to their friends and families back in Sri Lanka. 

The cross border operations, which reflect Kaparuka’s export of local brands such as Dilma tea, Samahan and others to the U.S., account for around 6 percent of its revenue. 

Kapruka sells own-label products, which are manufactured by its fully owned subsidiary. Cakes and flowers sold under the ‘Kapruka’ brand accounted for 28 percent of total revenue in FY2021. The company plans to invest Rs.100 million of proceeds from the proposed IPO on upgrading existing technologies and infrastructure, while the balance is expected to fund its planned launch of Kapruka Platform Services.

Accordingly, Kapruka plans to invest Rs.200 million into envisaged Kapruka Partner Central, which will be a premier marketplace for well-established brick and mortar shops in the country. 

Pursuing its plans to introduce a dedicated eCommerce platform for pre-owned goods, the company is gearing to introduce Soldout.lk with an investment of Rs.50 million from the proposed IPO proceeds.

Further, the company also plans to invest Rs.100 million in cross border operations with a view to become fully fledged ‘e-commerce distributor’ that will manage, market, sell and ship Sri Lankan products to the U.S. primarily via Amazon and eBay. 

The company targets to increase the contribution from cross border operations to 25 percent of its revenue by 2025. 

In addition, Kapruka plans to invest the remaining Rs.55 million to launch Kapruka Wholesale Marketplace focusing on B2B sales.

Moreover, the company recently announced plans to commence accepting payments via crypto currencies shortly.
Based on the discounted cash flow (DCF) method, the company is optimistic of a potential upside of 33 percent for the investors.