Netizens Express Concerns Over Mamaearth’s Valuation


Twitter users have been raising valuation concerns since Honasa Consumer, parent of FMCG brands such as Mamaearth, filed papers with Sebi to raise funds through an initial public offering (IPO).

According to the draft red herring prospectus, the IPO includes a fresh issue of equity shares worth Rs 400 crore and an offer-for-sale (OFS) component of 4,68,19,635 equity shares by promoters, investors, and other selling shareholders (DRHP).

According to the media reports, in January 2022, it was valued at $1.2 billion. However, it is seeking a $3 billion valuation for its upcoming IPO, if it goes public at its target valuation. The intended valuation of around $3 billion would be valued at a multiple of 1,000 times the company’s profits. Mamaearth reported a profit of approximately Rs 22 crore.

Shares in the OFS were offered by promoters Varun Alagh and Ghazal Alagh, as well as investors Fireside Ventures Fund, Sofina, Stellaris, Kunal Bansal and Rohit Bansal, Rishabh Harsh Mariwala of FMCG firm Marico, and Bollywood actor Shilpa Shetty Kundra.

Further, the report added that even if it is assumed that funding of Rs 400 crore will take the profits of the company to Rs 240 crore and that 100 percent of the profits will be given as dividends, and that a startup grows at an inflation rate, it will take a poor investor 100 years (a valuation of Rs 24,000 crore) to recover his money. Meanwhile, investors have drawn comparisons between Mamaearth and Paytm’s IPO.

The company became profitable in FY22 with net earnings of Rs 14 crore; however, it registered a net profit of Rs 4 crore in FY22. Moreover, the company claimed in its DRHP that it is deriving benefits from economies of scale, as its gross profit margin improved over 3 percentage points in FY22.

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