HomeLane to acquire Design Café, raises ₹225 crore from Hero Enterprise, WestBridge and others

Bengaluru/Mumbai: Interior décor solutions provider HomeLane is set to acquire its smaller rival Design Café in a share swap transaction for an undisclosed sum, while securing ₹225 crore in fresh funding from investors including Hero Enterprise and WestBridge Capital to fuel its expansion.

The combined entity, which will be valued at about ₹3,000 crore (about $360 million), is expected to be Ebitda profitable and generate a revenue of ₹1,000 crore in 2024-25, the companies said in a statement. Currently, the two entities have a combined revenue of about ₹900 crore.

Ebitda, or earnings before interest, tax, depreciation, and amortisation, is a key metric of operational efficiency.

While the combined entity will cater to a more niche premium target market, HomeLane, Design Café and HomeLane’s affordable home interiors division, Doowup, will continue to operate as distinct brands, catering to different segments of the market, according to the statement.

The new capital is also expected to fund HomeLane’s expansion into new markets, including tier 2 cities, where it is seeing rising demand.

In January, Mint first reported on WestBridge Capital-backed Design Café’s exploratory talks to sell to peers such as Accel-backed HomeLane and KKR-backed Livspace for a merger. Other contenders included Saint-Gobain-held MyHome and the JSW Group.

“Our investment reflects confidence in their (HomeLane) business model and it also presents meaningful synergies with Hero Realty. We look forward to seeing the innovation and growth that this partnership will bring,” Sunil Kant Munjal, chairman of Hero Enterprise, said in the statement. 

The combined entity will use a tech-driven approach and leverage Design Café’s design expertise, HomeLane’s co-founders Tanuj Choudhry and Srikanth Iyer said in the statement.

Iyer added that India has a large market for interior décor providers and growth is imminent in the near term as more customers opt for established companies.

Companies of scale

India’s home interiors segment, pegged to be a $20 billion industry, is largely driven by unorganized local players and has seen very few businesses of scale emerge. 

Companies such as HomeLane and Livspace have been able to achieve some scale and cross the ₹1,000 crore revenue mark, although several other firms have struggled to grow their business. 

Those that have managed to beat the storm are also benefiting from a boom in real estate activity as several projects that were launched during the pandemic have started to materialize and are expected to generate a steady pipeline for next few years.

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“Both teams have shown strong execution in the past, and together, we believe that they will deliver industry-leading performance for all stakeholders,” said Sandeep Singhal, managing partner of Westbridge Capital, which participated in HomeLane’s latest fundraising round.

HomeLane, which was founded 10 years ago, also operates Cubico for corporate interiors, and Wrapzap. It has about 45,000 customers across 30 cities.

Design Café, founded in 2016 by Gita Ramanan and Shezan Bhojani, has raised nearly $30 million in funding so far, including from WestBridge Capital, Sixth Sense Ventures, Mirabilis Investment, Alteria Capital, and Fireside Ventures. 

The company, which also operates the Qarpentri brand of mass home interior solutions, is present in 10 cities across the country.

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