(Photo Credit: IndiaTimes)
Concerns are being raised ever since Mamaearths’s parent company, Honasa Consumer Ltd filed for its IPO with India’s capital markets regulator SEBI. Mamaearth is a Direct to Consumer (D2C) brand in beauty and personal care, co-founded by Ghazal Alagh and Varun Alagh.
Honasa Consumers filed its Draft Red Herring Prospectus (DRHP) with SEBI on December 29 to raise ₹ 2,900 crore through an IPO. It has proposed the sale of up to 46,819,635 equity shares, at the face value of ₹ 10, raising ₹ 400 crores for the company.
The current value of the skincare company is considered to be $3 billion while the estimated value of the company was $1.2 billion in January 2022 raising eyebrows of investors over the doubling in valuation in a year as the company files its draft papers.
Mamaearth reported a profit of ₹ 14 crores in the previous year. A comparison in valuation to its FMCG competitors in Price to Earnings ratio (P/E) Emami is 23x, Hindustan Uniliver Unlimited (HUL) is 62x, while Mamaearth is at 1,714x at the valuation of ₹ 24,000 crores.
In a statement on Twitter, Ms. Alagh denied quoting the valuation of $3 billion for Mamaearth.
India’s stock market is the 5th largest in the world in terms of market capitalization and has nearly 8,000 companies listed on its exchanges. 0nly 173 companies are valued at over $3 billion including Nykaa, Proctor and Gamble India, HUL, Marico, and Dabur India which are in a segment similar to Mamaearth.
A record number of companies have listed in 2022 including tech start-ups like Zomato, Nykaa, and Paytm in which investors have lost crores over their declining value to less than 50% of their listing price.
Investors and market veterans have been cautioning against the valuations of new-age start-ups asking for astronomical valuations over weak fundamentals and extremely high operating costs. An overpriced IPO could bear its brunt on retail investors subscribing to its IPO as the initial investors receive a payout.
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