Shilpa Shetty-backed Mamaearth planning to raise $150 mn from QIA, SoftBank, others for pre-IPO round: Report

Personal care brand Mamaearth is planning to raise about $120-150 million in a new funding round ahead of its upcoming initial public offering (IPO), a report said on Thursday. Earlier this month, Mamaearth's parent firm Honasa Consumer Private Limited received the go-ahead from the Securities and Exchange Board of India (Sebi) for its IPO. In March this year, Honasa Consumer delayed its IPO due to unfavourable market conditions. 

Honasa Consumer has reportedly held preliminary discussions with investors such as SoftBank, sovereign wealth funds like Singapore's GIC and Qatar Investment Authority (QIA), and pre-IPO investors like Fidelity Investments to raise funds of $1.5 billion for the IPO, Moneycontrol reported. 

The round will mostly be a secondary share sale, as Mamaearth, a profitable company, does not need a primary capital infusion at this time, the report quoted sources.

Even though founders Varun and Ghazal Alagh are confident of delivering an exit to investors via their upcoming public listing, a few early investors want to offload shares before the IPO, the report added.

Mamaearth filed its draft red herring prospectus with the market regulator SEBI in December last year. The company had proposed a fresh issue of equity shares aggregating up to Rs 400 crore and an offer for sale (OFS) of up to 46.82 million shares. 

The company, which operates brands such as The Derma Co and BBlunt besides Mamaearth, was valued at $1.2 billion when it raised $52 million in January 2022 in a round led by Peak XV Partners.

If Mamaearth can crack the deal with SoftBank, it will be its first investment in India in over 15 months. 

“SoftBank has been largely looking at follow-on rounds. Mamaearth is profitable and with broader markets looking up, its IPO could sail through which makes it a good fit for SoftBank”, another source quoted in the report said.

The shareholders who are willing to dilute their holdings via the IPO include the founders Varun and Ghazal Alagh, Sofina Ventures SA, Evolvence, Fireside Ventures, Stellaris Venture Partners, Snapdeal founder Kunal Bahl, Bollywood actress Shilpa Shetty Kundra, Rishabh Harsh Mariwala, and Rohit Kumar Bansal. 

The draft offer document stated Honasa Consumer reported revenue from operations of Rs 722.73 crore during April-September 2022 with a profit of Rs 3.67 crore. This compares to Rs 943.46 crore in operational revenue for the year ended March 31, 2022, on net profit of Rs 14.43 crore.

Honasa Consumer had also said it plans to use the proceeds from the listing for advertising expenses, capital expenditure in setting up new exclusive brand outlets (EBOs), investment in its subsidiary BBlunt for opening new salons, and for general corporate purposes and unidentified inorganic acquisitions.

The Mumbai-based start-up had 35 EBOs till September 30 last year. The company said that the brand proposes to set up 132 new EBOs across India.

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