Northern Arc Capital and CredAvenue have provided INR 60 Cr ($7 Mn) in debt funding to Furlenco, a furniture leasing business. The startup issued two sets of non-convertible debentures (NCDs) to CredAvenue for INR 10 Cr through 40 NCDs and to Northern Arc for INR 50 Cr through 500 NCDs, according to regulatory papers that Inc42 was able to access.
The debt funding signals a shift in Furlenco’s capital-raising approach, likely due to a scarcity of equity funding in the furniture rental sector. This follows the company’s $140 Mn Series D round in 2021, led by Zinnia Global Fund, CE-Ventures, and Lightbox Ventures, which included a massive $120 Mn in venture debt.
Credits: Inc 42
In this article, we will explore what this latest fundraise means for Furlenco, how it fits into the larger furniture rental industry, and the challenges companies in this sector are facing.
Furlenco’s Journey: From Subscription Rentals to an Umbrella Brand
Founded in 2012 by Ajith Mohan Karimpana, Furlenco started as a subscription-based online furniture rental platform. Over the years, it expanded across major Indian cities, including Bengaluru, Mumbai, Delhi NCR, Chennai, and Kolkata. However, the startup later restructured its business under the umbrella brand House of Kieraya, incorporating:
- Furlenco (core furniture rental business)
- Furbicle (remanufactured furniture marketplace)
- UNLMTD (an annual subscription-based model)
This pivot aimed to diversify revenue streams and cater to evolving consumer preferences. However, the company continues to face strong headwinds in a market that has not grown as rapidly as anticipated.
The Struggles of the Furniture Rental Industry
The idea of renting furniture became popular among young professionals and millennials looking for flexible living arrangements, but the business has had trouble growing successfully. The growing availability of reasonably priced EMIs, which make ownership a more alluring alternative to renting, is a major factor impeding growth.
Additionally, rental enterprises now have to rely on debt funding, which comes with additional financial burden, due to a lack of consistent equity contributions. For example, Furlenco had to fire 180 workers in March 2022 in order to reduce expenses and increase profitability before going public.
Competition Heats Up: How Furlenco Stacks Against Rivals
Furlenco competes with Rentomojo, Cityfurnish, Rentickle, and even furniture e-commerce players like Pepperfry. However, rental businesses remain small in comparison to full-fledged furniture retailers.
Wakefit Innovations, which started in 2016 with mattresses before expanding into furniture, reported a 21% year-on-year revenue growth, reaching INR 986.4 Cr in FY24.
Rentomojo, founded in 2014, generated INR 193 Cr in operating revenue in FY24.
Despite being a significant player in the online furniture retail market, Pepperfry’s revenue dropped 31% to INR 180.9 Cr in FY24. According to reports, the corporation plans to go public in the next 18 months.
Despite being around for ten years, Furlenco’s income dropped 10% year over year to INR 139.6 Cr in FY24.
Future synergies in the home furnishings industry may be hinted at by the agreement made in July 2023 by mattress manufacturer Sheela Foam to purchase a 35% share in Furlenco for INR 300 Cr.
Credits: Tech Crunch
What Lies Ahead for Furlenco?
Despite being one of the most well-known names in the rental market, Furlenco’s dwindling earnings and debt load are concerning. With ownership models becoming more popular, the rental industry as a whole is at a turning point. Furlenco might need to make even more of a change in order to remain relevant, such adding more flexible financing choices or branching out into associated home services.
In order to be competitive in the changing furniture market, Furlenco will need to come up with a long-term plan while Pepperfry looks into going public and Rentomojo keeps expanding. The upcoming years will be crucial for its survival and expansion, regardless of whether it leans more toward subscriptions, resale, or financing models.
