Mamaearth's IPO Plans in Limbo as Startup Awaits SEBI Approval for DRHP
Mamaearth's IPO Plans on Hold as Company Monitors Global Stock Market Volatility
27 March 2023
According to a report, Mamaearth is currently in a wait-and-watch mode regarding its IPO plans, citing the volatility in the global stock market as the reason for the cautious approach.
According to reports, the company initiated informal talks with investors regarding the valuation for its IPO, but there was a disparity between the desired valuation and the amount that investors were willing to provide.
Mamaearth is currently awaiting formal approval from SEBI for its DRHP, following which the company will have 12 months to file RHP and proceed with taking the company public.
According to sources familiar with the matter, D2C beauty e-commerce unicorn Mamaearth has decided to put its initial public offering (IPO) on hold due to weak market conditions. Mamaearth is currently in a "wait and watch mode," given the persisting volatility in the global stock market, with the banking crisis over the last month in the US and Europe further exacerbating the market sentiment.
Mamaearth has stated that it is still engaging with SEBI regarding its DRHP and awaiting formal approval. The company clarified in a statement that after receiving approval, it will have 12 months to file RHP and take the company public, which it will do in consultation with its bankers, as per regulations.
As per the Reuters report, Mamaearth was looking to raise $200 Mn-$300 Mn through the public offer.
Mamaearth emphasized that pricing and valuations would be determined during marketing roadshows and stated that short-term valuations were not their main focus. The company also announced that its largest investor would not sell any shares in the company, and the promoters would still retain over 97% of their stake after the IPO. The startup clarified that they were not optimizing for short-term valuations, as their priority is long-term growth.
In December of last year, Honasa Consumer Limited, the parent company of Mamaearth, filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). According to the DRHP, the IPO would include an offer for sale (OFS) of 46.82 Mn shares, as well as INR 400 Cr worth of fresh issue of shares. The draft papers indicate that the promoter group holds a 37.6% stake in the company, while Sequoia India is the second-largest shareholder with a 24.01% stake.
Apply to Xartup Fellowship Program
Get ₹1.5 Crore Technical Funding
In 2016, Mamaearth was founded by the husband-wife duo of Varun Alagh and Ghazal Alagh, starting its journey as a D2C brand by selling baby care products. It then expanded into the personal care segment and now offers makeup, haircare, and beauty products. Currently, the startup delivers products to over 500 cities in the country.
According to the news agency's report, the company initiated informal talks with investors regarding the IPO valuation, but there was a discrepancy between the valuation that the D2C brand was seeking and what investors were willing to offer.
After filing the DRHP with SEBI, there were social media posts claiming that Mamaearth was seeking a valuation of $3 Bn, leading to intense debates around its revenue and profit. However, Mamaearth, which had a last private valuation of around $1.3 Bn, denied the rumors and clarified that it had not quoted or subscribed to the valuation numbers mentioned in the social media posts.
In FY22, the unicorn posted a standalone net profit of INR 19.8 Cr, a significant improvement from a net loss of INR 1,332.2 Cr in FY21. This latest development is noteworthy as several startups, including Snapdeal, Droom, PharmEasy, MobiKwik, and OYO, have either shelved their IPO plans or withdrawn their DRHP due to severe macroeconomic volatility and a funding winter over the past year. Mamaearth is supported by investors such as Fireside Ventures, Stellaris Venture Partners, Bollywood actress Shilpa Shetty Kundra, and Snapdeal founder Kunal Bahl.