Aimed at riding its next growth wave, Sri Lanka’s pioneer e-commerce enterprise Kapruka is to list on the Colombo Stock Exchange via a Rs. 500 million Initial Public Offering (IPO).

The funds raised via the IPO will be utilised to upgrade its existing technology and infrastructure and to expand its cross-border export activities.

In addition, Kapruka is planning to generate new revenue streams by introducing several new e-commerce products, including a marketplace for premium brands, a used goods marketplace and a wholesale marketplace. The new products are expected to contribute to incremental revenue from around FY2023/24 onwards.

Founded in 2003, Kapruka is currently the largest locally-owned e-commerce player in Sri Lanka, and via the IPO, joins the select group of progressive companies going public to harness new funds for growth, improve governance as well as widen the investment opportunities at the Colombo Stock Exchange. Acuity Partners Ltd. is the financial advisor and manager to the IPO. 

Kapruka provides a highly profitable, unique and differentiated non-marketplace e-commerce business model with in-house last mile delivery, serving both local and expatriate Sri Lankan clientele. 

Kapruka stocks over 135,000 products, has partnerships with over 300 renowned brands and serves over 1.1 million expat clients.  It has over 32,000 square feet of warehouse space and over 100 delivery vehicles to support its operations.

Analysts said Kapruka differentiates itself from other generic e-commerce players by having a significant focus on its own brand products, including bakery goods, flowers, value-added fruits and vegetables, which are manufactured in-house. 

It has also expanded its geographic presence to the US, UK and Australia to support exports of Sri Lankan products to those markets. Kapruka has entered into e-distributor agreements with globally recognised Sri Lanka brands such as Dilmah, Samahan, Akbar Tea, etc. 

Kapruka stocks and distributes its products online in foreign markets where the company has a geographic presence using popular e-commerce platforms such as Amazon, eBay and Etsy, with the products dispatched from Kapruka’s global offices. In addition, it promotes cross-border shopping services to Sri Lanka using its Kapruka Global Shop service. 

For the financial year ended March 2021, Kapruka recorded total sales of over Rs. 960 million, representing a 33% growth over the previous year. Approximately 60% of sales were generated from foreign/expat sources and 40% locally. Over 25% of sales comprised of Kapruka’s own brand products.

The company sells over Rs. 35 million per month of bakery products and over Rs. 16 million per month of fresh produce and flowers.

In the current financial year (FY22), Kapruka is said to be on track to achieve total sales of over Rs. 1.45 billion and projected sales of approximately Rs. 1.8 billion in FY23. 

Analysts said Kapruka’s Gross Profit margins had improved to over 45% in the current year (from over 35% in the previous year), whilst net margins in first quarter of the current year improved significantly to around 14% driven by greater operating leverage.

Its operating margins compare very favourably with large-scale global e-commerce peers, despite the smaller size of the Sri Lankan market which affords less opportunity to scale-up operations. GP margins are expected to remain stable going forward, supported by Kapruka’s unique product mix and business model, whilst net profit margins are expected to continue to improve as the company gains further operating leverage from past investments made in its logistics and other infrastructure.   

In terms of future prospects, analysts said Kapruka is expected to benefit from similar tailwinds as other global peers in the e-commerce space with the pandemic accelerating the trend towards online shopping.

Furthermore, Sri Lanka has a lower penetration of online retail which is estimated to be around 1% of total retail, compared with over 20% in developed markets with the highest levels of e-commerce penetration. This provides ample growth opportunities for e-retailers in Sri Lanka, analysts added.