Mamaearth IPO on hold: Investors giving cold shoulders to $3 billion valuation?

Mamaearth IPO has gone on hold amidst the shaken confidence of investors in Indian startup success story. The Indian skincare startup planned to raise between $200 million and $300 million through new equity and an offer to sell some shares.

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Another Indian startup has put its IPO plan on hold, for an indefinite period. The much-talked Mamaearth IPO is the latest one facing the heat due to tough market conditions.

Mamaearth, an Indian skincare startup, has reportedly delayed its initial public offering (IPO) without commenting or passing any statement related to the IPO. The development has taken place a month after two other Indian startups had to back off from their planned IPO launch.

Mamaearth parent Honasa Consumer Ltd filed documents for an IPO in December last year. It planned to raise between $200 million and $300 million through new equity and an offer to sell some shares. The successful IPO would have potentially valued the company at around $3 billion.

Mamaearth has been backed by a few of India’s marquee investors, including Sequoia Capital and Belgium’s Sofina. The decision to delay mamaearth’s IPO is the result of the ongoing turmoil in stock markets worldwide and uncertainty about the financial health of banks.

Mamaearth was founded in 2016 by Varun Alagh and Ghazal, a husband-wife duo. Since then, Mamaearth has been betting heavily on India’s booming beauty & personal care market. According to the company’s IPO papers, Mamaearth’s growth has averaged 12% per year. The known valuation of Mamaearth peaked at $1.2 billion in January 2022.

Mamaearth had planned to market the IPO and start engaging investors in initial discussions in January this year. However, that has not been achieved, claims ET citing some unnamed sources. The report also claimed that there was a discrepancy between the seeking valuation and the amount investors are willing to pay to stake.

However, the company still has a lot of time to explore more territories and options before it the deadline started approaching.

The company has time until December to get approval from the Securities and Exchange Board of India and file its final prospectus. According to sources, it still intends to list but with some delay as investors are either giving cold shoulders or being very conservative with offered valuation.

If the table turns in favour of the company, it may reevaluate the market and kick off its IPO marketing process in October.

The latest response by Varun Alagh, Chief Executive of Mamaearth, hints the management doesn’t want to appear in a desperate state to launch its IPO at a compromised valuation.

Though he refrained from commenting on the IPO being halted but stated that the company would not be “optimising to short-term valuations” as they are in the market with a long-term vision.

He also stated that Sequoia, the largest investor in the company, is not willing to dilute any percentage of its stake during the IPO, and that the founders would retain more than 97% after the IPO.

Just last month Indian apparel retailer Fabindia, which Azim Premji’s billionaire fund backs, and Jewellery retailer Joyallukkas had to pull their IPOs due to weak market conditions.

During the last twelve months, the impeding market conditions have forced many gung-ho Indian startup unicorns to either flush their IPO dreams or postpone them indefinitely. Those startups that were fortunate to launch their IPO successfully are also struggling with their stock price and valuation which is nosediving. Nykaa, Paytm are some of the biggest examples of this poor state of Indian startups in the stock market.

The delayed Mamaearth IPO is one more setback to the Indian startup community as it will only add woes to the already shaken confidence of global investors in the loss-making Indian startup ecosystem.



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