Speculation has swirled around Mamaearth’s valuation since parent company Honasa Consumer submitted a draft prospectus (DRHP) to the Securities and Exchange Board of India (SEBI) on December 29.
Honasa Consumer said it was considering funding ¥2,400 SEK through an initial public offering (IPO).The company plans to raise about ¥According to the company’s DRHP report, 400 million came from the issuance of new shares, and the remainder came from shareholders’ offers to sell up to 46,819,635 shares (OFS).
In January 2022, the company raised $52 million at a $1.2 billion valuation. Valuation jumped in less than a year ¥24,000 kroner or $3 billion. However, this has raised valuation concerns among investors. ¥$1.4 billion for the fiscal year ending 2022.
Mamaearth co-founder Ghazal Alagh denies claims about the company’s high valuation. “Valuations are not mentioned in our DRHP as it is standard practice. Discovering valuations is a process that takes place over time as we enter deeper conversations with our investor community.” she tweeted last Wednesday.
“I have not quoted or subscribed to the valuations mentioned in various posts on social media,” she said.
Let’s take a look at Mamaearth’s financials, recent acquisitions and business opportunities, as reported in the company’s DRHP report.
About the company
Ghazal Alagh and Varun Alagh launched Mamaearth in 2016. The company is engaged in the business of distributing beauty and personal care products (“BPC”). Since its inception, the company has added his five new brands to its portfolio. The Derma Company, Aqualogica, Ayuga, BBlunt and Dr Sheth’s.
According to RedSeer Report, as of Q2 FY2023, Mamaearth is India’s fastest growing BPC brand with an annual revenue of ¥The company said in its DRHP report that it achieved 10 billion within six years of its launch (last 12 months).
Mamaearth captured 5.3% market share in Indian online BPC market in calendar year 2021.
As of September 30, 2022, the company’s portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrance segments.
Purpose of offer
Honasa Consumer will use the net income for advertising expenses to increase brand awareness and name recognition, investment in subsidiary BBlunt to open new salons, and capital expenditures to open new EBOs.
| detail | Approximate amount of money ( ¥Cr) |
| Advertising expenses to improve brand recognition | 186 |
| Capital expenditure incurred by the Company to set up a new EBO | 34.2 |
| Invested in subsidiary BBlunt to open new salons | 27.51 |
| General corporate purposes and unspecified inorganic acquisitions | – |
| Source: Company RHP Report |
market opportunity
The Indian BPC product market is undergoing a radical re-industrialization due to technological convergence, demographic dividend and rising consumer aspirations.
Moreover, the market for BPC products in India is expected to grow from approximately $17 billion in 2021 to approximately $30 billion in 2026, at a CAGR of approximately 12%. Food & Groceries, Jewelry & Watches, Fashion, Home Appliances, Home & Life, Pharmacy & Wellness, etc. in India during this period.
India’s per capita spending on BPC products is currently one of the lowest compared to some other developing countries, and as its GDP per capita approaches $2,000, growth is on the rise. at the apex. This is a key inflection point observed in other developing countries.
bargain
In March 2022, the company acquired BBlunt Salons and the BBlunt products business with the goal of expanding its portfolio into the professional hair care and styling segment.
Salon service space was worth about US$8 billion in 2021. This includes men’s salon services worth about US$2.7 billion in 2021 and women’s services worth about US$4.2 billion. 2021 includes approximately USD 1.2 billion of beauty spas and beauty treatments.
Mamaearth also acquired Dr Sheth’s in April 2022 and operates through its subsidiary, Fusion Cosmeceutics Private Limited.
Dr Sheth’s offers specialty skin care solutions crafted with a combination of natural and active ingredients. Dr Sheth’s has been developed by three generations of skin his specialists, with a focus on nature-inspired and scientifically-validated products, according to the company’s DRHP report.
Finance
According to the DRHP report, the company’s net profit in the first half of 2023 is ¥367 million.The company recorded the following earnings ¥722.73 million rupees for the six months to September 2022.
reported the total revenue of ¥943 million rupees in FY22, ¥460 million in FY21. According to DRHP, the company will make a net profit of ¥Net loss of $14.1 billion vs. $14.1 billion in 2022 ¥$133.2 billion in 2021; ¥428 million in FY20.
| Finance ( ¥Cr) | First half of 2023 | 2022 | 2021 | 2020 |
| Operating revenue | 722.73 | 943 | 460 | 109.78 |
| Advertising expense | 271.9 | 391.5 | 177.9 | 45.85 |
| net profit/loss | 3.67 | 14.1 | -1332 | -428 |
| Source: RHP Report |
Most of the company’s revenue in FY22 and FY21 came from online channels with 70% and 81% respectively, while the offline segment recorded 28% and 18% share in FY22 and FY21. Did.
For the years 2020, 2021, 2022 and the six months ended September 30, 2022, the Company’s advertising expenses were ¥4.585 billion, ¥177.9 million, ¥391.5 million rupees, and ¥271.9 million each. On a consolidated basis, these charges accounted for 41.76%, 38.68%, 41.49% and 37.63% of total revenues for these periods.
The company said fierce competition could hurt its operating margins. “We face stiff competition from a number of competitors, some of which are larger, spend more on advertising and marketing, and have far more advantages than us, such as the ability to offer significant discounts. I have many resources.
“We also face competition from new entrants who can flexibly respond to changing business and economic conditions. In addition, competitors may innovate more quickly and efficiently, and new technologies will It may increase competitive pressure by enabling competitors to offer more efficient or lower cost products.
evaluation
The company’s 2022 net profit is ¥Taking into account the 14 kronor, the price/earnings ratio is 1,714 times. Valuations were expensive compared to other stocks in the same peer group.
| company name | PE ratio |
| Mama Earth * | 1714x |
| nikah | 964x |
| Spring | 63.9 times |
| godrej consumer | 58.2x |
| Gillette India | 55.2 times |
| Mariko | 53.9 times |
| Colgate-Palmolive (India) | 39.2 times |
| Emami Co., Ltd. | 22.2 times |
| Bajaj Consumer Care Limited | 18.4 times |
| (Source: Trendlyne) *Expected valuation |
FMCG giant Mariko, which has a strong pie in personal care brands, is trading at 53 times revenue. Similarly, other stocks including Godrej Consumer, Gillette India and Emami are trading at 58x, 55x and 22x earnings respectively.
New-age technology stocks that have gone public at high valuations have eaten away at investors’ wealth since going public. For example, shares of Paytm, Nykaa, Zomato and PB Fintech are trading 30-70% below their IPO prices. Investors compare his Mamaearth valuation to Paytm and Nykaa.
Disclaimer: The views and recommendations above are those of the individual analyst or brokerage firm and not those of MintGenie.
Number of IPOs
