Mamaearth co-founder Ghazal Alagh clarifies on IPO valuation concerns

Ghazal Alagh, Co-founder of Mamaearth, has said that the firm has neither quoted nor subscribed to the valuation number being mentioned in social media.

Responding to social media posts that had expressed concerns regarding the company's valuation demand, Ghazal said, "In our DRHP as is the standard practice there is no mention of valuation."

It has been reported that Honasa Consumer, the parent company of D2C brands such as Mamaearth, The Derma Co, and BBlunt, has sought a valuation of $3 billion, or about Rs 24,000 crore, through its IPO.

“Valuation discovery is a process, which will take place over time as we get into deeper conversations with the investor community,” Ghazal tweeted.

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In its draft red herring prospectus (DRHP) filed last week, Mamaearth’s parent said it is looking to raise as much as Rs 2,400 crore through its IPO. It expects to raise about Rs 400 crore through a fresh issue of shares and the rest through an offer for sale of about 4.7 crore shares.

Analysts often take into account a company's EV/sales multiple—a measure that compares the enterprise value of a company against its annual sales—to get a sense of a company's valuation.

Analysts said that, assuming a 40-45% CAGR for Mamaearth and taking into account projected sales figures for FY23, the company was looking at a valuation of 10x enterprise value to sales.

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Mamaearth’s IPO plans raise tough questions on timing, valuation

Co-founders Varun and Ghazal Alagh have offered 32,86,300 shares in the offer for sale, while external investors Evolvence India, Fireside Ventures, Sofina, and Stellaris are expected to sell 10,83,600 shares, 79,72,478 shares, 19,133,948 shares, and 12,755,965 shares, respectively, according to the DRHP document.

Along with the institutional investors, angel investors Kunal Bahl, Rishabh Mariwala, Rohit Bansal, and Shilpa Shetty Kundra also participated in the offer-for-sale with 7,77,672 shares, 4,77,300 shares, 7,77,672 shares, and 554,700 equity shares respectively. 

Sequoia Global, one of Mamaearth’s major investors, will not be selling its shares.

In January 2022, Honasa Consumer had raised $52 million at a valuation of $1.2 billion.