Indian skincare startup Mamaearth eyes $3 bln valuation in 2023 IPO

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

The company was last valued at $1.2 billion in January this year when it raised fresh funds from investors including Sequoia and Belgium’s Sofina.

Mamaearth is targetting a valuation of around $3 billion – 10-12 times forward revenue, a person briefed on the discussions said. It plans to file draft regulatory papers by the end of this year, said sources, who declined to be named as the plan is private.

Two of those sources said Mamaearth is in early-stage discussions to raise at least $300 million in its IPO, with a third source pegging the number at $350 million.

A Mamaearth spokesperson declined to comment on its IPO plans. The company’s target valuation for the IPO, and the funds it plans to raise, have not been previously reported.

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

JP Morgan Chase declined to comment. JM Financial and Kotak did not immediately respond to requests for comment.

Mamaearth’s IPO plans come during a broader rout in capital markets and a slowdown in India’s booming startup ecosystem that recorded a stellar $35 billion in record fundraising last year. Now, some startups are cutting back on staff and finding it difficult to raise funds, Reuters has reported.

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

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

One equity research analyst, however, said the success of Mamaearth’s IPO could hinge on how it plans to rapidly expand into offline sales. Most Indians still go to retail outlets to shop, with e-commerce accounting for just 5-6 percent of spending.

CEO Alagh told the Business Standard newspaper in January that 70 percent of Mamaearth’s sales come from online platforms, but it was targetting a bigger offline presence and aiming to reach 40,000 retail outlets in 100 cities this year.

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

The company recorded a post-tax profit of 246 million Indian rupees ($3.15 million) for the year ended March 2021.