Mamaearth eyes ₹2K cr pre-Diwali listing

Mumbai: Honasa Consumer Pvt. Ltd, which operates direct-to-consumer brands Mamaearth and Derma Co., is targeting an initial public offering (IPO)before Diwali this year that could value the company as much as ₹10,000 crore- ₹12,000 crore ($1.2 billion-$1.4 billion).

The company is lining up investors for its anchor book for which it is raising ₹800 crore to ₹900 crore from institutional investors, said three people with knowledge of the development, asking to be anonymous.

“The book-building process has started around this valuation, and there is considerable interest from investors for that value,” the first person cited above said. Capital Group and Fidelity International are among the investors interested in the anchor book. “There will also be a lot of domestic investors,” the second person added. Diwali begins on 10 November.

For Mamaearth, this valuation is a climb-down of sorts, as it was valued at $1.2 billion in January 2022. It entered the coveted unicorn club when it then raised $52 million.

Mamaearth’s first IPO attempt last year had faced criticism over its valuation target of over $3 billion. Since then, markets have tempered, funding has cooled, and several investors have marked down their portfolios.

If this IPO goes through, this will be the first of the new-age companies willing to go public after the funding winter that started in 2022. With the capital markets bouncing back, these companies are looking at exploiting a window of opportunity to go ahead with their listing plans.

The decision to proceed with the IPO comes after the Gurugram-based company’s UDRHP (updated draft red herring prospectus) got the final nod from the securities market regulator Sebi. It is yet to get the formal go-ahead.

The IPO will comprise a fresh issue of ₹400 crore and an offer-for-sale (OFS) of up to 46.82 million shares, according to the draft red herring prospectus (DRHP) filed in December 2022.

The OFS, or stake sale by existing shareholders, is likely to be around ₹1,500 crore- ₹1,600 crore, the people cited above said. The total issue size is likely to exceed ₹2,000 crore.

Its backers, Sofina Ventures (9.5% stake), Stellaris (9.5% stake) and Fireside Ventures (10.4% stake), are the likely sellers who are looking to partially cash out. It also counts Peak XV (formerly Sequoia Capital India) and Evolvence among its other backers.

The founders Varun Alagh and Ghazal Alagh together hold around 37.5% stake in the company. Ghazal is likely to monetize around 1% of her stake, while Varun will sell 3% as part of the OFS, the company’s documents show.

Emailed queries sent to the spokespersons of Capital Inc. and Fidelity remained unanswered. Mamaearth declined to comment. Kotak Mahindra Capital, Citigroup Global Markets India, JP Morgan India and JM Financial are managing the share sale.

Founded in 2016, the company sells safe cosmetics and personal care products. Ever since the launch, the company has also added more brands, such as Derma Co., Aqualogica, Ayuga, Bblunt and Dr. Sheth’s. It has a portfolio of nearly 140 Mamaearth products and over 40 items under the Derma Co. brand.

For the year ended 31 March 2022, the company’s operating income stood at ₹456 crore it earned in FY21. It reported a profit of ₹14.4 crore in FY22. It is yet to file its FY23 results.