About the Company:

The company is engaged in the business of products in the baby care, face care, body care, hair care, colour cosmetics and fragrances segments. Since launching Mamaearth in 2016, the company has added five new brands, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s and have built a 'House of Brands' architecture.

Since inception, it has worked with the primary objective of developing products that address beauty and personal care problems faced by consumers. Its flagship brand, Mamaearth, is built to service a core customer need for safe-to-use, natural products, and focuses on developing toxin-free beauty products made with natural ingredients.

The company has built a large base of consumers across its brands and aims to continuously acquire new users to drive growth. It intends to continue to invest in innovative brand building and performance marketing initiatives to drive awareness and generate trials for its brands. . Moreover, to support its offline expansion plans, it intends to differentially focus on other modes of advertising, including television advertising, to reach and target a larger consumer base.

The company’s new to early-stage brands are incubated in its online channel with the key objective of acquiring new users and generating trials amongst early adopters of these brands. It leverages the online channel to

(i) test product market fit by capturing early feedback from consumers on brand proposition, positioning, packaging and performance;
(ii) capture valuable consumer insights across purchase behaviour, product preferences, and need-spaces; and
(iii) generate customer affinity by providing a personalized and engaging brand experience for consumers.

Industrial Overview:

Beauty and Personal Care in India is an approximately US$20 billion market, and expected to grow at 11% annually to be approximately US$33 billion by 2027. Sized US$20 billion, BPC in India is a large market (6th largest in the world). BPC is significantly underpenetrated in India. Traditionally, Indian households have spent lesser on BPC in comparison to other countries. For instance, in 2022, BPC spends per capita in China were around 3 times of that in India. Even compared to relatively smaller economy like Indonesia, India’s per capita BPC spends are lower, indicating massive growth headroom

The BPC products market in India is undergoing a fundamental re-industrialization owing to the convergence of technology, demographic dividend, and growing consumer aspirations. BPC is expected to grow faster than categories like food, grocery and consumer electronics. This makes BPC one of the most attractive retail categories in terms of growth. 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 at the cusp of growth as GDP per capita has crossed $2,000, which is a critical inflection point as observed in other developing economies.

BPC products and salon services have an addressable market of US$49-54 billion by 2027. The salon services space was sized at approximately US$9 billion in 2022. The subcategories within salon services are services for men (US$3 billion), services for women (US$4.7 billion), and Beauty-spa and Beauty-treatments (US$1.3 billion) in 2022. Between 2016 and 2022, the market has doubled from US$4 billion to US$9 billion. This was driven by proliferation of branded salons across city tiers, increased consumer exposure to new styles and treatments and their willingness to pay a premium for these treatments. The growth momentum is strong and by 2027, the market is projected to be US$16-21 billion.

IPO Objectives:

1. Advertisement expenses towards enhancing the awareness and visibility of the company's brands

2. Capital expenditure to be incurred by the Company for setting up new EBOs (Exclusive Brand Outlets)

3. Investment in the company's Subsidiary, Bhabani Blunt Hairdressing Private Limited ("BBlunt") for setting up new salons

4. General corporate purposes and unidentified inorganic acquisition

Financials

The Company’s revenue from operations increased from Rs. 459.99 crores in FY 2021 to Rs. 1,492.75 crores for FY 2023 indicating a CAGR growth of 80.14%.

The company's EBITDA became positive from Rs. (1,334.03) Crores in FY 2020-21 to Rs. 22.76 Crores in FY 2022-23. The company’s EBITDA margin has turned positive in FY 21-22 and stood ~ 1.5% in FY 22-23.

The company's Net Profit moved from Rs. (1,332.22) Crores in FY 2020-21 to Rs. 14.44 Crores in FY 2021-22 before turning back negative in FY 2022-23 to INR (150.97) Crores.

The RHP of the company has disclosed RoNW as earning metric for comparison. The same is calculated by

Return on Net Worth (%) = Restated net profit/(loss) after tax attributable to equity holders of the Group / Restated net worth for equity

The RONW has been in a declining trend as it stood at 2.23% in FY 2021-22, which got reduced to -23.57% in FY 2022-23.

Valuation:

The company is having losses for the FY 22-23, the company's price-to-earnings ratio based on FY24 Q1 annualized earnings stands at 105.54, while the industry's PE ratio is 53.63, suggesting that the issue price is overvalued. Additionally, the company's price-to-book ratio is 16.81 (including the goodwill arising on Acquisitions), whereas the industry's PB ratio is 19.37, signifying a fair valuation of the issue price.

Key Risks:

1. In the past the company had incurred losses. The company and the value of the equity shares could be severely impacted by any losses in the future. The recorded losses in the past for Financial Years 2021 and 2023, and the three months period ended June 30, 2022 was ₹1,332.22 crores, ₹150.97 crores, and ₹11.53 crores, respectively.

2. The company has historically experienced high advertising costs, which have helped to fuel an increase in its revenue from operations. There's no guarantee that the company will be able to sustain the same rate of increase in revenue from operations in the future as it did in prior years/periods if it cuts back on its advertising expenditures.

3. The business and the demand for the services could be negatively impacted by a company's marketing strategy that heavily relies on celebrities and social media influencers.

4. Due to intense competition, the company may lose market share, have to spend more on marketing and advertising, and have to give discounts. All of these actions could have a negative impact on the company's operations and lower profitability

5. The company depends on a number of third-party service providers to market and deliver its goods to customers, as well as on outside technology suppliers for specific areas of its daily operations. Its operations, cash flows, financial situation, and business could all suffer from any problems or inefficiencies in these areas.

IPO Details