Mama Earth: India’s First D2C IPO
Monday, Oct 30, 2023
Mama Earth: India’s First D2C IPO
A game-changer igniting D2C's future and ready to set a new standard in the startup universe. MamaEarth, founded in September 2016 by a young couple and headquartered in Gurugram (India) is distinguished in the cosmetics industry of India as an online platform that offers natural and toxin-free skin care products. Honasa Consumer Limited, being the parent company of the brand, has grown several consumer brands like The Derma Co., Aqualogica, Dr. Sheth's, and Ayuga apart from MamaEarth. Their USP lies in creating products that are completely safe & certified toxin-free through world-class research. To make products that are mum-baby friendly & meet stringent international standards, MamaEarth was born and has now excelled in its field by Identifying a gap in the market and meeting the demand for safe products. The confidence shown by the company in their products now brings them to this big day of their IPO which opened for subscription on Tuesday, October 31, and closed on Thursday, November 2.
IPO Outlook and Offer Details
The issue was a combination of a fresh issue of 1.13 crore shares, price band for its issue at ₹308-324 per equity share with a face value of ₹10 per share. The minimum lot size for an application was 46 Shares. The issue included a reservation of up to 34,013 shares for employees offered at a discount of Rs 30 to the issue price. About 75% of the offer is reserved for qualified institutional buyers, 15% for non-institutional investors, and the remaining 10% for retail investors. Mamaearth share prices were trading at a premium of ₹7 in the grey market. Yet, beyond the buzz, financials unveil a mixed bag: a surge of 57.13% in revenue but a -1145.25% drop in PAT between March 2023 and March 2022 portrays a mysterious figure.
Unfolding suspicions
Despite projections of a $3 billion valuation, the current $1.2 billion valuation is much less than their earlier projection in its draft red herring prospectus (DRHP) last December which surely raises eyebrows. However, amidst the storm, the 7-year-old entity showed profits, a rarity in this cutthroat market. In fact, the firm’s IPO was also oversubscribed by 7.6 times, the portion being reserved for Honasa Consumer's employees was subscribed 4.87 times. Notably, the company reserved shares worth ₹1 crore for its employees. Oversubscription highlights market confidence, yet the founders and initial investors selling their stake draw keen attention. The founders and initial investors themselves are selling their stake as out of 17000 crore IPO only 365 crores are fresh issues of shares and the rest are just an offer for sale.So what's driving Mamaearth's success? Stellar marketing strategies, partnering with 50,000+ influencers, and a flair for revenue generation. It raises the question if it's a star in the making or a cautionary tale.
Is Mamaearth special?
Mamaearth's strength is its promise of toxin-free products, but without patents, and by making its products through third-party entities, it's easier for anyone to copy them. That's risky for a company that relies on what it sells. If anyone can do the same thing, will Mamaearth stay special? It's a big question as this story of skincare and business unfolds.
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