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Exclusive: After raising $58 Mn and 8 years in business, Craftsvilla finally is up for sale


India’s wannabe Etsy – Craftsvilla – an ethnic wear e-commerce startup is reportedly scouting for an acquisition deal. Hit by funding crunch on top of mounting losses, it makes sense that this online handicraft store turned into an ethnic wear brand is looking to sell the business.

But the question is who will buy it? According to two Entrackr sources, the Manoj and Monica Gupta couple led company approached Snapdeal with an acquisition proposition but the e-commerce company is highly unlikely to do so.

And why not? It doesn’t sell what it propagates. India is a country where there are more than 7 million artisans producing a wide variety of handicrafts and ethnic products, but Craftsvilla supply chain is limited to mostly Surat, a place where cloth material is cheap and easily available. Where is the art, craft, originality, and ethnicity in that?

Cherry on top, Craftsvilla is a full stack end-to-end platform that designs, trades and delivers all on its own and even has offline stores. It will be highly difficult to accumulate such a mechanism into the broader e-commerce marketplace. A lot of changes will have to be made, and in the end it won’t add much to the platform apart from being another vendor with a few offline stores. It wouldn’t make sense to settle a deal with Craftsvilla if the acquirer isn’t looking to foray into the offline model.

And this strikes out the likeliness of Flipkart or Amazon to pay heed to Craftsvilla as well.

“The company is now looking at Future Group or Reliance Industries as a possible avenue of acquisition, where it has a slightly higher chance of being able to present its case as these companies operate both online and offline, and are large enough to be able to take care of the business metrics and functions that require repair and reformation,” outline Entrackr’s three sources on condition of anonymity.

Problems after problems

This is no surprise. Craftsvilla had been facing one too many challenges in executing the vision since the beginning. First and foremost is the problem of reaching out to the core community of artisans living in the widespread expanse of pan India. Then there was the hurdle of bringing them to use the internet, and creating value for them meanwhile efficiently managing the logistics around product procurement and delivery.

So the company came up with the solution of mostly Surat centric business, and hence compromised on the vision.

“The management also went wrong. Senior management left, and in wake of piling up losses and depleting revenues of FY17, the company had to resort to layoffs,” entailed the second source on the same condition of anonymity.

While all this did help the company in restore, rather maintain, its revenue figures and control losses in FY18, there was still the problem of a funding crunch and piling up debts, on both supply and sales end.

In FY18, Craftsvilla’s revenues grew by a mere 3.6% from Rs 30.35 crore in FY17 to Rs 31.45 crore. The major work had been on controlling expenses that halved from Rs 116.33 crore to Rs 59.13 crore. Losses followed the pattern and decreased from Rs 85.98 crore to Rs 27.68 crore.

Not just that, the Trade Payables more than doubled from Rs 49.83 crore to Rs 117.25 crore in and Trade Receivables took an almost 6-fold leap from Rs 97.42 lakhs to Rs 5.6 crore in FY18. On one hand, this indicates growth in business but on the other hand, the inability to realise these harms the business in functionality.

The problem here is the fact that the company hasn’t received any new investment to fund these losses. Last it had raised $34 million (roughly Rs 224.74 crore) Series C round from marquee investors like Sequoia Capital,  Lightspeed Ventures, Nexus Venture Partners, Global Founders Capital and Apoletto Asia – all existing investors, in November 2015.

So far, the Mumbai-based company had raised over $58 million (Crunchbase) across eight rounds.

Since then, it has lost Rs 206.22 crore in FY16, Rs 85.98 crore in FY17, Rs 27.68 crore in FY18, and surely some more in FY19.

The recent reports around Craftsvilla pouring in money via its parent entity – Rs 30 crore in 2018, Rs 23 crore in 2019 till now – could be the same money raised in 2015 being transferred in tranches yet, or new money to fund these losses. But till when can the company continue to do that without raising a proper round or having to resort to acquisition.

And since we’ve already established that acquisition is a tricky business for Craftsvilla, will the next step be an acquihire? Or a complete shutdown?

Queries were sent to Manoj Gupta by Entrackr regarding the same but we received no response till the time of publication. The post will be updated as and when the responses come in.

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