Sequoia-backed Mamaearth eyes $3 bn valuation in 2023 IPO

Direct to consumer (D2C) skincare and beauty brand Mamaearth is in talks to raise about $300 million in a planned IPO over the next 12-15 months and aims for a valuation of about $3 billion, according to a Reuters report.

The Sequoia Capital-backed Indian skincare startup was last valued at $1.2 billion in January 2022 when it raised new funds from investors including Sequoia and Belgium’s Sofina.

Mamaearth targets a valuation of about $3 billion — 10-12 times future earnings based on revenue growth and future revenue potential, the report said. It plans to submit draft regulatory documents by the end of 2022.

The skincare startup is in early talks to raise nearly $300 million through its first share sale, with a firm figure of $350 million.

The company is reportedly in talks with JP Morgan Chase, India’s JM Financial and Kotak Mahindra Capital to appoint them as bookrunners for the deal.

Founded in 2016, Mamaearth has become popular in India with its range of “toxin-free” products such as facial cleansers, shampoos and hair oils. It competes with Unilever’s India unit, Hindustan Unilever, and Procter & Gamble Co in the booming personal care sector.

Mamaearth’s IPO plans come amid a broader shift in capital markets and a slowdown in India’s booming startup ecosystem, which saw a record $35 billion in fundraising last year. Now some startups are cutting back on staff and finding it difficult to raise funds.

Mamaearth was co-founded by Varun Alagh, a former director of Hindustan Unilever, and his wife Ghazal. With the brand endorsed by popular Bollywood celebrities, the duo has capitalized on India’s growing e-commerce adoption by offering its products on platforms such as Amazon and Walmart’s Flipkart.

The Indian beauty and personal care industry is expected to grow to $27.5 billion by 2025, from $17.8 billion in 2020, estimates Indian financial services firm Avendus. The number of online beauty shoppers is also expected to rise to 135 million from 25 million during that period, it added.

However, an equity research analyst said the success of Mamaearth’s IPO may depend on how it plans to expand quickly into offline sales. Most Indians still go to stores to shop, with e-commerce accounting for only 5 to 6% of spending.

CEO Alagh had told Business Standard in January that 70% of Mamaearth’s sales come from online platforms, but it aimed for a bigger offline presence, targeting 40,000 stores in 100 cities this year.

For the fiscal year ending March 2022, Mamaearth’s parent company, Honasa Consumer Pvt Ltd, posted $130 million in revenue, with a small profit, one of three sources said.

Despite the Covid-19 pandemic, MamaEarth had grown at a blistering pace in its fiscal year ending in March 2021, as well as turning profitable. The startup posted a profit after tax of 246 million.

In addition to India, Mamaearth has established branches in Nepal, Bangladesh and Sri Lanka and is about to launch in the Middle East.

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