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EXCHANGE RATE PREDICTION: 2022

20 Reasons to stay clear from the Kapruka IPO Vote_lcap16%20 Reasons to stay clear from the Kapruka IPO Vote_rcap 16% [ 43 ]
20 Reasons to stay clear from the Kapruka IPO Vote_lcap21%20 Reasons to stay clear from the Kapruka IPO Vote_rcap 21% [ 58 ]
20 Reasons to stay clear from the Kapruka IPO Vote_lcap30%20 Reasons to stay clear from the Kapruka IPO Vote_rcap 30% [ 83 ]
20 Reasons to stay clear from the Kapruka IPO Vote_lcap34%20 Reasons to stay clear from the Kapruka IPO Vote_rcap 34% [ 93 ]

Total Votes : 277

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FINANCIAL CHRONICLE™ » CORPORATE CHRONICLE™ » 20 Reasons to stay clear from the Kapruka IPO

20 Reasons to stay clear from the Kapruka IPO

+2
apphunter
Chamath1980
6 posters

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Chamath1980


Stock Trader

20 Reasons to stay clear from the Kapruka IPO
 
1.       A 2 Billion LKR valuation for a company that sells mostly cakes and flowers to expats online is outrageous to say the least. There are no competitive advantages the business enjoys other than being a first mover. Kapruka was a first entrant and captured market share, as there was no alternative to handle the process of sending a cake to a loved one from overseas. Now however several competitors and new entrants are eating up the market share at a rapid pace for the Kapruka product range. (Daraz, Wishque Lassana Flora Etc..)
 
2.       Kapruka’s reputation has been severely hurt by their unethical actions to try and make exorbitant profits during the Covid lockdown at the expense of innocent customers. Several people have completely stopped using anything related to Kapruka due to this. Kapruka continues to manipulate online reviews of their services by unethically outsourcing handing their corporate reputation to social media agencies or handling it in-house. During the lockdown the average rating of Kapruka on Google was 2-3. Now most positive reviews on social media are likely paid for. Independent review forums outside of Kapruka’s control paint the true picture of the company’s dismal service.
 
 
3.       Dulith claims that revenue was down due to lockdown and will only rise in the future, this is a blatantly false statement. The revenue during the covid pandemic should have been the peak revenue the company will earn probably in its lifetime. This is because many new customers and existing customers used Kapruka during this time due to no other alternative. Most people used Kapruka due to their heavy social media advertising promise to deliver during the pandemic. Many people have shifted away from Kapruka after the lockdown. Supernormal revenue and profit are a one-time instance and will not be sustained in the future.
 
4.       Retail businesses’ have established their own websites/platforms and outsourcing delivery. (Keels, Glomark, etc..) This will further erode revenue for Kapruka as expats and locals use the services directly.
 
 
5.       Cake companies are also starting their own websites/platforms and outsourcing delivery. (Kingsbury, Waters Edge, Taj in addition to ubereats providing logistic support for other smaller cake companies) Kapruka claims to bake their cakes in house, I am yet to hear one person say that Kapruka has the best cakes, or I only want a Kapruka cake. There is no advantage over other experienced bakers that Kapruka has with regard to cake presentation, taste or quality.
 
6.       The financial projections presented by Kapruka is an absolute joke, it seems to be heavily manipulated. (look at short term/long term liabilities + related transactions due). The three year cumulative PE is a staggering 224.91, this is insane even for Sri Lanka.
 
 
7.       Export operation claims are blatantly misguiding, Kapruka simply has listed other people’s products on Amazon such as Tea, that they source from Akbar, Dilmah etc.. There is no strategic advantage for Kapruka. This can be done by anybody including you and me by getting listed on Amazon/Ebay (it’s a simple process). Companies such as Akbar, Dilmah themselves have decided to list their products on their own on Amazon and offer the same product cheaper than Kapruka. With search engine optimization becoming commercialized (You can pay to list your products right at the top), this revenue stream will easily die out in the future for Kapruka. As new entrants can pay to take the top position.
 
8.       The company continues to engage in unethical business practices to date, Kapruka has shamelessly listed and sells cakes with trademark and copyrighted intellectual property such as Spongebob, Superman, Flintstone, Peppa Pig, Dora the explorer etc under Kapruka cakes.. Please visit their website under the cake section to find evidence of this. This is a potential lawsuit in the making that will cost the company a lot in the future, if the owners of this intellectual property decides to sue Kapruka for unauthorized usage of their intellectual property it will be an easily winnable case. Under copyright laws, no business can profit from the intellectual property without permission. In addition to being highly unethical it is also illegal.
 
 
9.       In addition to a large lawsuit compensation in the future, the company will also lose a significant revenue stream from cakes. As these cakes are most likely in high demand by children that are being sent by their hardworking mother or father working abroad. After the lawsuit the company will be unable to sell them.  
 
10.   Dulith is either attempting to run away into the sunset with the IPO money by dumping the shares on the innocent public of the dying kapruka, or he is trying to save the company by engaging in new high risk business ventures due to fading revenue. It is important to note that, he is attempting to enter these high risk new business ventures with the public’s money rather than his own. Based on the projections given by dulith, the return on investment far exceeds 35-40%. He claims to have found “NO GO NO GO” areas and cracked the code to make money. I find it very strange that a bank loan or even personal funds was not used to raise the capital at the current rate of 9% to 10%. The return on investment according to Dulith is very high, hence why would he give up shares in such a profitable and growing business that can reach 40% to 50% growth by giving up a stake. Would it not make more sense to finance it internally or even via a bank loan since he projects such high growth prospects?
 
11.   How your money will be used (Wasted) !
Upgrade existing technology and infrastructure. So they want 100 Million LKR to upgrade their existing platform. This is absolute madness. Today with so much of open source software and platforms available, hosting your very own custom made e-commerce website “Mobile Ready” can easily be done for less than 100,000 LKR for a small business. The average cost to develop a medium to large e-commerce website in developed countries ranges from 10,000 to 35,000 USD. Kapruka wants 100,000,000. That’s almost $500,000 at current exchange rates. This is highly overpriced for an e-commerce platform in 2021.


12.   Another concerning area is the staff at Kapruka. Based on IPO prospectus, this shows that the company currently does not have the capabilities to develop a competent system in-house and will look to recruit highly skilled employees from outside. This naturally will increase the admin expense of the company significantly as these people will not come cheap. In addition the ability of a company like Kapruka to attract and retain talented staff remains to be seen. Outside of the recently appointed director board, there are no noteworthy names currently on the Kapruka labor force.
 
13.   Kapruka Partner Central will be a failure in the long run, Carbon copy of what Amazon does, so Kapruka is really going to be in the third party logistics business with this venture. This is a business that you need to have deep pockets as the profit comes from scale. Imagine deliveries to Jaffna, you need to have a wide deliver network. Kapruka is rather putting their money into developing applications and recruiting marketing staff. WTF. To get customers on board there are two very simple areas you need to satisfy. Provide the service at a reasonable price and reliable delivery of product. For this you need to invest in your logistic network. I do not see even a single cent being allocated towards their transport network. All the money is being put into unnecessary things.
 
 
 
 
14.   There are many emerging competitors in this space as well, large companies such as Hayleys and JKH can easily make the pivot to capture this market share. In addition a more worrying concern is the big boys such as Uber and Pickme that only need to make a slight pivot to enter this market space. They already have the entire network and infrastructure set up. A few tweaks and training programs for drivers and they can easily pivot to transporting products and services like they already do with food and customers. This is a very high risk area to enter, there is no situation that will work out for Dulith here, if he succeeds in signing on business to Kapruka partner central, the big boys are going to see this and decide to enter. These are guys with deep deep pockets. They have the money to offer free delivery and other benefits to capture the entire market share away from Dulith.
 
 
15.   I do not see, how Dulith can make this a success unless customers absolutely love dulith and Kapruka has high brand loyalty to rationalize that the customers will pay extra to use Kapruka rather than a competitor. I just do not see this, succeeding in the long run. Dulith and Kapruka have a very poor reputation in the eyes of most Sri Lankans.
 
16.   Used goods marketplace is an old idea. So basically they are going up against Ikman.lk and other similar platforms. Nothing innovative here. This is already a crowded market space with so many alternate options such as Facebook groups and other platforms. Again they seem to trying to differentiate by offering the delivery aspect as well. Dulith is trying to attract people to sell cars and property on his website. This will take time to develop, as there are clearly established platforms for this that people use to sell cars and property. Today if you want to buy a used car. If you want to buy property ? What would you do ? Do you guys remember how Ikman.lk started. It took them a long time to get to the place where they are today. Why would I visit soldout.lk that has 5 people on the website when I can visit ikman. That has over 1000.
 
17.   You need traffic traffic traffic. How do you plan on attracting people to your platform and to use your platforms over others? What incentives are you offering sellers or buyers to visit this over competitor products? The most important question, how long are you planning on sustaining these incentives as you will most likely be breaking even or even operating at a loss as you compete for market share with established players. These are questions that clearly need to be answered. This will clearly be costly and very high risk.
 
 
18.   Simply stating I am going to start an used marketplace website to sell cars and property because these things are an attractive opportunity is wishful thinking. Plenty of these websites exist, the key is how are you going to attract traffic to your website. This is an absolute joke, they plan to promote the website using leaflets in traditional newspaper advertising. What is this a marketing plan made in 1990? The world has evolved beyond leaflets in newspapers. If this is how you are going to attract people to your website based on your prospectus. WTF Dulith.
 
19.   Kapruka wholesale marketplace. Selling wholesale groceries, again going up against the supermarket chains that already have an established online presence. There is no advantage for Kapruka. The wholesale marketplace will be dominated by the established owners of the groceries who can offer the products much lesser than if Kapruka were to purchase from them, put their profit and resell back to the consumer.
 
20.   Kapruka is largely in the online gift industry despite claiming to be in e-commerce. The main factor that drives customers to Kapruka is convenience, I highly doubt people are coming to purchase these products because of quality or being Kapruka branded. These are generic products, the main purchase point seems to be the convenience of the website and then delivery. Easily imitable by a new entrant.
 
Final note, make sure you read the disclaimer at the bottom of the prospectus.
The company basically says that all these things we told you in the prospectus, it can be bullshit. This is what Dulith told me, I have not checked if what Dulith has told me is true or not.
Dulith told me they will reach over one billion in sales, so I also put they will reach one billion in sales. Dulith told me that they have this amount of assets, I have not checked if that is true or not or independently verified the actual financial position of this company.
 
Going forward, we need much stricter regulation as it is always the innocent hard earned money of the public that gets robbed by unethical individuals.
Stay clear of Kapruka !

Beyondsenses likes this post

apphunter


Equity Analytic
Equity Analytic

It looks like the IPO is an attempt for the company to diversify into software services. Kapruka platform services is a good idea in general. But these are in my opinion early-stage startup ideas. It is going to take time to build, test and launch these platforms. According to the prospectus, these platforms should be completed by 2024. Investors probably will have to wait nearly 2 years to see some revenue generated from these investments. In my opinion, LKR 405.5Mn is a lot for these initiatives.

rajini


Manager - Equity Analytics
Manager - Equity Analytics

It is similar to PCH who dumped shares when Laptop stores taking the regular PC market.
Kapruka no longer make any sense. Now the concept is different and Kapruka don't have any future.

cpriya


Stock Analytic
Stock Analytic

No one should promote businesses which rob people's hard earned money. I hope Kapruka will learn a lesson. almost 90% of Kapruka's client base is made of Sri Lankans living abroad. If you check out their prices - you will see that they have priced goods at very unreasonable rates - not even following latest Dollar rates. They are thieves in my opinion.

cpriya


Stock Analytic
Stock Analytic

Chamath1980 wrote:20 Reasons to stay clear from the Kapruka IPO
 
10.   Dulith is either attempting to run away into the sunset with the IPO money by dumping the shares on the innocent public of the dying kapruka, or he is trying to save the company by engaging in new high risk business ventures due to fading revenue.

This is the main reason i guess this IPO exists.

Beyondsenses

Beyondsenses
Manager - Equity Analytics
Manager - Equity Analytics

Thank you so much for the info Chamath1980 Wink

rajithasahan


Senior Equity Analytic
Senior Equity Analytic

Highly over value  counter..Another bull shit.. Very Happy Very Happy

Net Asset over 4 times
P/E ratio 220 Rolling Eyes Rolling Eyes Rolling Eyes


Don't loose ur hard earned money

Nim*** Per***  loka man promoting..

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