WHY MAMAEARTH IPO IS GETTING SOO MUCH HATE?
The cutting-edge product range from Mamaearth has solved a frequent issue faced by Indian parents. In a nation where the majority of baby products do not adhere to safety norms, Mamaearth offers baby items that are safe by international standards and brimming with natural benefits.
It is the first Asian company to receive the “MADE SAFE” certification. The products sold by this company don’t include nearly all of the poisons that are prohibited in most nations. Mamaearth is more than just a business name; its goods are created with love and care. The corporate office of the organisation is situated in Gurugram (Gurgaon), India. In case you’re wondering, Mamaearth is based in India.
Mamaearth was founded in 2016 by Ghazal and Varun Alagh. Honasa Consumer Private Limited was incorporated, and in December, the Mamaearth line of toxic-free products was introduced. The pair set out on a quest to give chemical-free products to every newborn in India. The company currently serves babies, parents, grandparents, and everyone else as a producer of organic items.
Contract manufacturers make Mamaearth’s items under licence. The Mamaearth trademark is owned by Honasa Consumer Pvt. Ltd.
Its primary source of revenue is online, and its business model is based on posting offers on D2C platforms like Amazon and Flipkart and then profiting from those sales as well as those of products that are on display in conventional brick-and-mortar stores. Mamaearth uses a novel product that fuels growth derived from the blue system and adopts an omnichannel strategy.
When Mamaearth began business in 2016, its catalogue contained only six items. More than 80 natural, toxic-free items are used by more than 1.5 million Indians. Additionally, more than 500 cities worldwide currently provide it. From Rs 16.8 crores at the end of FY19 to Rs 110 crores in FY20, it saw an increase in operating revenue. Additionally, it has accomplished the outstanding feat of limiting losses to Rs 5.9 crores. The investment bank Jefferies claims in its estimate that the company may earn more than Rs 500 crore in FY21.
The MamaEarth brand offers more than 80 natural products that address baby care, hair care, skincare, and other needs. MamaEarth’s unique product line is focused on newborns and other people. Mamaearth offers a wide range of cutting-edge items, including the first bamboo- based baby wipes in India, simple tummy rolls with hing and fennel intended to relieve colic, and 100% natural plant-based toothpaste.
In addition, a variety of skin and hair care products are available, many of which use well- liked natural components like onion, ubtan, tea tree, vitamin C, argan, coco, and charcoal. It has grown to include a range of goods that cater to moms and their infants, from stretch mark removal serum to sunscreen. The brand is built around motherhood. A favourite among customers is the onion line for mothers.
Now Owner of the well-known brand Mamaearth Honasa Consumer filed its Draft Red Herring Prospectus (DRHP) with market regulator Securities and Exchange Board of India (SEBI) on December 29 in order to generate around 2,900 crore through an initial public offering just before the end of 2022. (IPO).
Since then, many people have questioned the startup’s values. Even the IPO of Mamaearth has been compared by some to that of Paytm. The company’s valuation is the key point of argument. When compared to the prior fiscal year’s 459 crore and the financial year 2020’s 109 crore, the company’s revenue from operations in the year ended March 2022 increased by a factor of two to reach 943 crore. Revenue for the first half of 2022, which concluded on September 30, was 722 crore. In FY22, it made a profit of 14.4 crore. According to the business’s DRHP, in contrast, the company reported losses of 1,332 crore in FY21 and 428 crore in FY20.
The company intends to raise money through the public offering of equity shares with a face value of Rs. 10 per share. The Mamaearth IPO consists of an initial public offering (IPO) of up to 400 crore rupees worth of new equity shares and an offer for sale (OFS) of up to 46,819,635 equity shares by selling stockholders. Many recent market listings of new-age internet businesses, including Paytm, Nykaa, and Zomato, have seen significant losses in their stock prices. Many firms even postponed or scrapped their preparations for an IPO as a result of the gloomy market climate.
The IPO carries a huge number of risks, including:
1. The demand for our products could decline, negatively affecting our business, results of operations, financial condition, and cash flows, if the company is slow to recognise and effectively address shifting consumer preferences and spending patterns as well as shifting beauty and personal care trends.
2. It generates a sizable quantity of revenue from a select few products. Any decline in sales of important items will have a negative impact on the company’s operations, cash flows, and financial situation.
3. The business lacks its own production. All of our products are made by third-party manufacturers,which exposes the company to risks that, if they materialise, could negatively impact its operations, financial position, results of operations, and business.
4. Shilpa Shetty, the company’s brand ambassador, will be selling shares in the public offering. The business and demand for our services may suffer if our marketing approach relies too heavily on celebrities and social media influencers.
5. For sales through the online channel, the organisation depends on connections with specific markets and web traffic generators. The company stated in its DRHP that, for the fiscal years 2020, 2021, and 2022 as well as the six-month period that ended on September 30, 2022, “our revenue from online channels across all our brands amounted to 998.43 million, 3,742.93 million, 6,595.34 million, and 4,291.15 million, respectively, representing 90.94%, 81.37%, 69.91%, and 59.37% of our revenue from operations.”
The company’s revenues could be negatively impacted if it is unable to grow its offline sales network.