The Sequoia Capital-backed Indian skincare start-up Mama earth is in talks to raise fresh funds of at least USD300 million in a planned IPO next year and is seeking a valuation of around USD3 billion.
Mama earth was founded in the year 2016 and has become popular in India with a range of toxin-free products such as shampoos, face washes and hair oils. The skincare start-up competes with the Indian units of Hindustan Unilever and Procter and Gamble Co., in the successful personal care FMCG sector.
In January this year, the skincare start-up raised fresh funds from its investors including Sequoia and Belgium’s Sofina and the company was valued at USD1.2 billion.
Mama earth is targeting a valuation of around USD3 billion in its scheduled IPO. The company is planning to file draft regulatory papers by the end of this financial year.
Mama earth hopes to raise USD300 million
A source said Mama earth is in early-stage discussions to raise at least USD300 million in its IPO, with a third source fixing the number at USD350 million.
The sources added that the company is in talks with India’s JM Financial and Kotak Mahindra Capital and JP Morgan Chase to appoint them as promoters to the deal.
Mama earth’s IPO plans have come during a broader collapse in capital markets and a slowdown in India’s booming start-up network that recorded a stellar USD35 billion in fundraising the previous year. In recent times some start-ups are finding it difficult to raise funds and are cutting back on staff.
Mama earth was co-founded by Varun Alagh, a former Hindustan Unilever executive, along with his wife Ghazal. The duo has cashed in on the growing e-commerce industry in India by offering its products on Walmart’s Flipkart and Amazon.
The Indian Financial services firm Avendus estimates that by 2025 India’s beauty and personal care industry is expected to grow to USD27.5 billion from USD17.8 billion in 2020. The number of online buyers for beauty products is projected to rise to 135 million from 25 million.
.An equity research analyst, however, said that most Indians still go to retail outlets to shop, with e-commerce accounting for just about 5-6 percent of spending, this could determine the success of Mama earth’s IPO and how it plans to rapidly expand into offline sales.
The CEO of the skincare brand, Varun Alagh said in January that 70 percent of Mama earth’s sales come from online platforms, but the company is targeting a bigger offline presence focusing on reaching 40,000 retail outlets in 100 cities this year.
Mama earth’s parent company, Honasa Consumer Private Limited registered a revenue of USD130 million with a marginal profit for the financial year ending March 2022.
For the year ended March 2021 the company recorded a post-tax profit of 246 million Indian rupees (USD3.15 million).