Mamaearth, Gearing Up for IPO, Reports INR 151 Cr Loss in FY23 Due to Goodwill Impairment
Three points you will get to know in this article:
- Mamaearth, a D2C unicorn, reported a net loss of INR 151 Cr in FY23 due to an exceptional loss of INR 155 Cr attributed to impairment of goodwill and other intangible assets related to Momspresso.
- Despite the loss, Mamaearth’s operating revenue increased by 58% to INR 1,492.7 Cr in FY23, driven by its expansion into personal care brands and acquisitions.
- Mamaearth is preparing for an IPO, aiming to raise approximately INR 1,700 Cr and targeting an estimated valuation of around INR 10,500 Cr.
Mamaearth, the direct-to-consumer (D2C) unicorn gearing up for its IPO, faced a financial setback in the fiscal year ending March 31, 2023, due to a one-time loss. The parent company, Honasa Consumer Limited, helmed by the husband-wife team Varun and Ghazal Alagh, witnessed a shift from the previous fiscal year’s net profit of INR 14.4 Cr to a net loss of INR 151 Cr in FY23.
Established in 2016, Mamaearth originally specialized in baby care products but evolved into a comprehensive personal care brand. The brand has expanded its reach to more than 500 cities across India. This shift reflects the dynamic journey of Mamaearth, growing from its roots in baby care to becoming a holistic personal care solution for consumers nationwide.
“Operating under the umbrella of brands such as The Derma Co., Aqualogica, and Ayuga, this company has strategically invested in ventures like BBlunt and Dr. Sheths, broadening its product range to fortify its financial standing. This expansion is evident in the company’s escalating operational earnings.
In the fiscal year 2023, the startup disclosed an impressive operating revenue of INR 1,492.7 Cr, marking a remarkable surge of 58% from the preceding fiscal year’s INR 943.4 Cr. Mamaearth predominantly generates revenue by retailing its products through both online and offline channels. Factoring in supplementary income streams, the total revenue for FY23 reached INR 1,515.3 Cr, signifying a substantial uptick of 57% compared to the previous fiscal year’s INR 964.3 Cr.”
Exceptional Loss Due To Momspresso
Mamaearth faced a notable setback in FY23, registering an extraordinary loss of INR 155 Cr, primarily attributed to the impairment of goodwill and other intangible assets. Excluding this impact, the startup would have marked a commendable net profit of approximately INR 3.7 Cr for the fiscal year. The direct-to-consumer (D2C) brand incurred a goodwill write-off of INR 136 Cr specifically for Just4Kids Services Private Limited, the parent company overseeing Momspresso. According to Mamaearth’s draft red herring prospectus (DRHP), Momspresso’s net value (assets minus liabilities) stood at INR 16.2 Cr at the time of its acquisition in December 2021. Intriguingly, Mamaearth secured a majority stake in Momspresso for INR 152.3 Cr, with an additional payment of INR 136 Cr designated for the “goodwill arising on acquisition.” This strategic move demonstrated Mamaearth’s commitment to investing in and acquiring promising ventures, despite the temporary financial setback experienced during the fiscal year.
Zooming Into The Expenses
In the fiscal year 2023, Mamaearth experienced a noteworthy 59% rise in total expenses, reaching INR 1,501.6 Cr, as compared to the previous year’s INR 942 Cr. This upward trend harmonizes with the growth in the company’s operational earnings, showcasing a dynamic financial trajectory.
Advertising Expense
The D2C brand spent the most on advertising, at INR 530 Cr. In comparison to INR 391.4 Cr in FY22, this was an increase of 35%. 35% of the total expenses were spent on advertising.
Purchase of Stock in-Trade
In FY23, the company spent INR 502 Cr. on raw material purchases, up 65% from INR 304.7 Cr. in FY22.
Employee Benefit Expense Rise
During the year under review, Mamaearth spent INR 164.8 Cr on employee benefit expenses, an increase of 109% from INR 78.8 Cr in FY22. According to LinkedIn, Mamaearth employs about 500 people.
Mamaearth has successfully secured $111 million through various funding rounds to date, garnering support from notable backers such as Peak XV Partners, Sofina, Fireside Ventures, and Stellaris Venture Partners. The startup, valued at $1.2 billion in its latest assessment, is now poised for its upcoming Initial Public Offering (IPO), scheduled to commence on October 31, 2023. In its pursuit of financial backing, Mamaearth aims to generate approximately INR 1,700 crore through a strategic blend of a fresh issue and an offer-for-sale, setting its sights on an estimated valuation of roughly INR 10,500 crore.
Within the competitive landscape of the direct-to-consumer skincare industry, Mamaearth faces rivals such as Wow Skin, Juicy Chemistry, Good Glamm, and Nykaa. In the dynamic realm of skincare, Mamaearth is charting an ambitious course, going head-to-head with industry counterparts to carve its niche. With financial backing from esteemed investors and a valuation of $1.2 billion, Mamaearth is poised to enter the public market with its IPO on October 31, 2023. The startup seeks to secure INR 1,700 crore through a mix of fresh offerings and sale options, eyeing a valuation around INR 10,500 crore.
As it navigates the competitive landscape of direct-to-consumer skincare, Mamaearth finds itself in the company of formidable opponents like Wow Skin, Juicy Chemistry, Good Glamm, and Nykaa. This sets the stage for an exciting journey as Mamaearth endeavors to make its mark in the skincare industry. Mamaearth, a D2C unicorn, experienced a net loss of INR 151 Cr in FY23, primarily attributed to an exceptional loss of INR 155 Cr due to impairment of goodwill and intangible assets related to Momspresso. However, the startup saw significant growth in operating revenue, which increased by 58% to INR 1,492.7 Cr, driven by expansion into personal care brands and acquisitions. Mamaearth is now gearing up for an IPO, aiming to raise approximately INR 1,700 Cr and has set a target valuation of around INR 10,500 Cr.
