scorecardresearchMamaearth IPO: Amid valuation concerns, a comparison of its PE ratio with
Ghazal Alagh and Varun Alagh, founders, Mamaearth

Mamaearth IPO: Amid valuation concerns, a comparison of its PE ratio with those of Nykaa, HUL and others

Updated: 10 Jan 2023, 11:50 AM IST

Mamaearth, a beauty and personal care product company, is set to go public with an IPO. The parent company, Honasa Consumer, is looking to raise 2,400 crore through the offering. However, there have been some concerns about the company's valuation since it posted a net profit of 14 crore for the fiscal year ending FY22. Ghazal Alagh, co-founder of Mamaearth, has denied these claims and stated that the valuation will be determined during deeper conversations with the investor community.

Various speculations have been swirling around Mamaearth's valuation since its parent company, Honasa Consumer, filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on December 29.

Honasa Consumer said it is looking to raise 2,400 crore through its initial public offering (IPO). The company expects to raise about 400 crore through a fresh issue of shares and the rest through an offer for sale (OFS) by shareholders of up to 46,819,635 equity shares, according to company DRHP report.

In January 2022, the company raised $52 million at a valuation of $1.2 billion. In less than a year, the valuation jumped to 24,000 crore or $3 billion. However, this raised valuation concerns among investors, as the company posted a net profit of 14 crore for the fiscal year ending FY22.

Ghazal Alagh, co-founder of Mamaearth, has denied claims about the firm's expensive valuations. "In our DRHP, as is the standard practice, there is no mention of valuation. Valuation discovery is a process that will take place over time as we get into deeper conversations with the investor community," she tweeted last Wednesday.

"We have not quoted or subscribed to the valuation numbers which are getting mentioned in various posts on social media," she said.

Let's take a look at Mamaearth's financials, as well as its recent acquisitions and business opportunities, as reported in the company's DRHP report.

About company

Ghazal Alagh and Varun Alagh launched Mamaearth in 2016. The company is engaged in the business of selling beauty and personal care products ("BPC"). Since its inception, the company has added five new brands to its portfolio: The Derma Company, Aqualogica, Ayuga, BBlunt, and Dr Sheth’s.

According to the RedSeer Report, as of Q2 FY23, Mamaearth was the fastest-growing BPC brand in India, with an annual revenue of 10 billion (in the previous 12 months) within six years of launch, the company stated in its DRHP report.

Mamaearth had a market share of 5.3 percent in the online BPC market in India during calendar year 2021.

As of September 30, 2022, the company's portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics, and fragrances segments.

Objective of the offer

Honasa Consumer intends to use the net proceeds to fund advertising expenses to increase brand awareness and visibility, investment in its subsidiary, BBlunt, to open new salons, and capital expenditures to open new EBOs.

Particulars Estimated Amount ( in Cr)
Advertisement expenses towards enhancing the awareness and visibility of our brands186
Capital expenditure to be incurred by our Company for setting up new EBOs34.2
Investment in its Subsidiary, BBlunt for setting up new salons27.51
General corporate purposes and unidentified inorganic acquisition -
Source: Company RHP report 

Market opportunity

The BPC products market in India is undergoing a fundamental re-industrialization owing to the convergence of technology, the demographic dividend, and growing consumer aspirations.

Moreover, the market for BPC products in India is expected to grow from approximately $17 billion in 2021 to approximately $30 billion in 2026 at a CAGR of approximately 12 percent, which is among the highest within the broader retail categories and faster than other retail categories such as food and grocery, jewellery and watches, fashion, consumer electronics, home and living, and pharmacy and wellness in India during this period.

India’s per capita spend on BPC products is currently one of the lowest in comparison to some of the other developing countries and is on the cusp of growth as GDP per capita nears $2,000, which is a critical inflexion point as observed in other developing economies.


In March 2022, the company acquired BBlunt Salons as well as the BBlunt product business, with the goal of expanding its portfolio to specialised professional hair care and styling segments.

The salon services space was approximately US$8 billion in size in 2021. It includes salon services for men, which were approximately US$2.7 billion in size, and services for women, which were approximately US$4.2 billion in size in 2021. Additionally, it also includes beauty spas and beauty treatments, which were approximately US$1.2 billion in 2021.

Mamaearth also acquired Dr Sheth’s in April 2022 and operates through its subsidiary, Fusion Cosmeceutics Private Limited.

Dr Sheth’s offers specialised skincare solutions crafted with a combination of natural and active ingredients. Dr Sheth’s was developed by three generations of skin specialists with a focus on naturally inspired and scientifically validated products, according to the company's DRHP report.


According to the DRHP report, for H1FY23, the company reported a net profit of 3.67 crore. The company recorded a revenue of 722.73 crore in the six-month period that ended in September 2022.

It reported total revenue of 943 crore in FY22, up from 460 crore in FY21. According to the DRHP, the company turned into a net profit of 14.1 crore in FY22, compared to a net loss of 1,332 crore in FY21 and 428 crore in FY20.

Financials ( in Cr)H1FY23FY 2022FY 2021FY20
Revenue from operations722.73 943460 109.78
Advertising Expenses271.9391.5177.9 45.85
Net profit / Loss3.67 14.1-1332 -428
Source: RHP report    

Most of the company's revenues in FY22 and FY21 came from the online channels, at 70 percent and 81 percent, respectively, while the offline segments recorded a share of 28 percent and 18 percent in FY22 and FY21.

During the fiscal years 2020, 2021, and 2022 as well as the six-month period that ended on September 30, 2022, the company's advertising expenses were 45.85 crore, 177.9 crore, 391.5 crore, and 271.9 crore, respectively. On a consolidated basis, these expenses made up 41.76 percent, 38.68 percent, 41.49 percent, and 37.63 percent of the total revenue from operations for those periods.

The company said that the fierce competition could hurt its operating profitability. “We face intense competition from a number of competitors, some of which are larger and have substantially greater resources than us, including the ability to spend more on advertising and marketing and offer substantial discounts,” it said.

“We also face competition from new entrants that may have more flexibility in responding to changing business and economic conditions than us. In addition, our competitors may innovate faster and more efficiently, and new technologies may increase competitive pressure by enabling competitors to offer more efficient or lower-cost products,” it added.


Taking the company's FY22 net profit of 14 crore into account, the stock price-to-earnings ratio came in at 1,714x. When compared to other stocks in the same peer group, the valuation was expensive.

Company NamePE ratio
Mamaearth *1714x
Godrej Consumer58.2x
Gillette India55.2x
Colgate-Palmolive (India)39.2x
Emami Ltd22.2x
Bajaj Consumer Care Limited18.4x
(Source: Trendlyne) * Expected valuation 

FMCG Major Marico, which has a strong pie in the personal care brand, is trading 53 times of its earnings. Similarly other stocks Including Godrej Consumer, Gillette India and Emami, are trading at 58, 55, and 22 times of their earnings, respectively.

New age tech stocks which listed at expensive valuations have eroded investors wealth since their listing. For instance, shares of Paytm, Nykaa, Zomato and PB fintech are trading 30-70 percent below their IPO prices. Investors are comparing the Mamaearth valuations with Paytm and Nykaa. 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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First Published: 10 Jan 2023, 11:50 AM IST