Kapruka says Partner Central project undershoots budget by Rs. 110.7 m

• e-commerce project Partner Central completed at Rs. 89.3 m against Rs. 200 m allocation due to efficiencies
• Unused IPO funds to be reallocated to working capital, subject to shareholder approval
• Cost savings driven by in-house development and use of existing teams

Kapruka Holdings PLC yesterday said that its IPO-funded Partner Central e-commerce project was completed well below budget, leaving Rs. 110.7 million unutilised and proposes reallocating the excess funds to working capital, citing in-house development efficiencies, and will seek shareholder approval for the change.

The company said that one of the principal objectives of its December 2021 Rs. 505 million IPO was the launch of the Kapruka Partner Central platform, a digital marketplace designed to support established brick-and-mortar merchants in Sri Lanka. 

The platform was intended to connect buyers and sellers through a unified marketplace, offer multiple fulfilment options including Fulfilment by Kapruka aligned with the Amazon “FBA” model, and provide an integrated end-to-end solution covering storage, pick-and-pack operations, island-wide delivery, returns, exchanges, and customer service.

According to the Prospectus, a sum of Rs. 200 million was allocated from IPO proceeds for the recruitment of technical staff, account managers and marketing teams, the design and development of the web application software, and awareness campaigns and seller-acquisition initiatives. 

The company noted that the project was to be executed through Kapruka E-commerce Ltd., a wholly owned subsidiary, without related-party involvement, and that development was scheduled to run from the second quarter of 2022 to the second quarter of 2024.

The Prospectus also disclosed several risks associated with the project, including rapid technological changes, evolving consumer buying behaviour, potential returns arising from low-quality third-party products, commission pressures from sellers, and import restrictions affecting product availability. 

It further cautioned that delays in investing the allocated funds could impact revenue generation from new customer acquisitions, although the company said such risks were considered manageable given its experience in implementing technology-driven platforms.

However, Kapruka Holdings said the Kapruka Partner Central Project had now been successfully completed at a total cost of Rs. 89.3 million, significantly below the originally budgeted amount of Rs. 200 million. It attributed the lower-than-expected cost primarily to complete in-house development of the Partner Central System, internal execution of software development work, and optimised staffing and marketing strategies utilising existing internal resources.

The principal cost components incurred included Rs. 8.4 million for Partner Central system development, Rs. 7.5 million for system enhancements, Rs. 8.2 million for the installation of a warehouse rack system, Rs. 13.2 million for the Partner Central launch ceremony, Rs. 22 million for the Partner Central rebranding initiative, and Rs. 30 million for vehicle purchases to support Partner Central operations. As a result, the unused balance from the funds originally allocated to this objective amounted to Rs. 110.7 million.

Reviewing the original objectives disclosed in the Prospectus, the Board noted that the Partner Central platform was fully developed in-house by Kapruka Techroot personnel at a cost of approximately Rs. 15.9 million, eliminating the need for additional external recruitment funded by IPO proceeds. 

While a Project Manager was recruited to oversee the initiative, the company said IPO funds were not utilised for this purpose, and all marketing activities were carried out entirely by existing in-house teams.

The company added that the platform launch was supported through newspaper articles, website content, and social media channels, all executed using internal resources. 

Rebranding initiatives were undertaken to support the marketplace model, while any promotional discounts were managed under the rebranding program without specific utilisation of IPO funds. Ongoing promotional activities continue to be funded through the company’s general marketing budgets.

The Board said it was of the view that the unutilised balance did not arise from over-budgeting at the planning stage, but rather from operational efficiencies, effective utilisation of internal resources, strategic cost management, and optimisation of existing staff and budgets.

In this context, Kapruka Holdings said its Board of Directors had proposed that the unutilised IPO balance of Rs. 110.7 be reallocated towards the company’s working capital requirements. The proposed reallocation is expected to strengthen the balance sheet, support ongoing financial stability, and facilitate operational continuity and future growth initiatives. Any utilisation of these funds will be subject to prior approval of the Board.

The company said it would seek shareholder approval for the proposed variation in the application of IPO proceeds at a forthcoming Extraordinary General Meeting.

The company’s share closed yesterday unchanged at Rs. 11. The net asset value per share was reported at Rs. 4.88 as at end-September 2025 on a 20% public float. Founder Dulith Herath holds an 80% stake in the company.