UrbanLadder heads towards EBIDTA profitability by laying off over 400 employees

The requirement of sustaining by itself because of inability to raise new funds, UrbanLadder has sent about 40% of its workforce home. The layoffs have happened across multiple levels, functions, and cities alike.

In the final quarter of FY19, the company has deliberately pulled down the number of employees from over 1,100 to 700. While the February 2019 report claimed 90 employees were laid off with the count coming down to 800, the new reports reflect the activity took place on a larger scale.

This was done because the losses of the firm had been mounting up since FY17 - Rs 459.1 crore in FY17 and Rs 117.3 crore in FY18. While the revenue was greater than the loss in FY18 - Rs 204.7 crore, a huge of it must have gone into compensating for the large gap between losses and revenue of FY17- Rs 101.9 crore.

Laying off employees to improve on profitability here signifies that the company couldn’t manage cutting down on other expenses, or improving on efficiency by scale. The co-founder and CEO of UrbanLadder told BusinessLine that they had no other option and if not for layoffs they would have to shut down.

The firm had plans to raise $25 million last year, but that is apparently not needed anymore. Of the $25 million it was only able to raise $12 million.

Now, by trimming on its workforce numbers, the firm claims to be turning EBIDTA positive in just a couple of months. The firm, even with the lack of funds, is planning to survive and even expand on the cash it generates from the business. In addition to their existing balances, they generated Rs 1 crore in cash last month and plan on keeping this up for the September quarter.

The base of these plans becomes clearer with the company’s claims of generating Rs 345 crore in revenue in FY19. The goal for FY20 is Rs 8-10 crore in EBIDTA.

However, even with the layoffs, the company has not cut down on its expansion plans and is in works to add more stores in Chennai and Pune to its existing count of 11 stores in Delhi and Bengaluru.

This is the second time after 2016, that the firm has engaged in layoffs and if anything, this goes on to show that giving pink slips to employees in times of financial distress doesn’t become a permanent solution to any problem.

Looking at the hazy future of the company several top-level people have exit the firm as well. The major one including the President and COO, Ajit Joshi. Apart from him, Sales and Marketing, Operations and Supply Chain, Engineering, HR, and Product heads have also left the firms.

The reason behind the 18-month long funding crunch for UrbanLadder, as BusinessLine reports is the new FDI e-comm policy. However, a week after UrbanLadder raised $12 million last year, Pepperfry, one of the bigger rivals, raised Rs 250 crore, and in September, LivSpace bagged a $70 million round.

This further heightened the pain of UrbanLadder in form of tough competition, the largest one being the entry of deep-pocketed Swedish giant IKEA. It remains to be seen how UrbanLadder manages to keep up the business on a self-sustenance mode achieved on the back of layoffs.

Responding to our story, UrbanLadder said that it laid off 90 employees from its corporate office back in March 2019 and this does not amount to 40% of the headcount - the previous headcount number was 957 and now is 711 which amounts to about 25% (including third party employees and resources).

“As an organization, February and March were not easy months for us, as we are a company that deeply appreciates its employees. But after having taken those tough calls, we are happy to know that the employees we did part ways with have used Urban Ladder as a great stepping stone to pursue great opportunities within the industry and beyond. We look forward to the future as we have some exciting things in store in the upcoming few months,” said the company.