IPO-bound D2C unicorn Mamaearth encountered a financial downturn in the fiscal year ending on March 31, 2023, mainly due to a one-time loss. This downturn resulted in its parent entity, Honasa Consumer Limited, reporting a net loss of INR 151 Crore for FY23, a stark contrast to the INR 14.4 Crore net profit registered in the preceding fiscal year.
Established in 2016 by the husband-and-wife team of Varun and Ghazal Alagh, Mamaearth had its origins in the sale of baby care items. Over time, it transformed into a comprehensive personal care brand. Presently, the company distributes its products to more than 500 cities across India.
Mamaearth’s Pre-IPO for Goodwill Impairment!
The company manages brands such as The Derma Co., Aqualogica, and Ayuga, and it has taken ownership stakes in BBlunt and Dr. Sheths, broadening its product lineup to bolster its revenue. This expansion is clearly mirrored in its increasing operating revenue.
In FY23, the startup disclosed an operating revenue of INR 1,492.7 Crore, marking a significant surge of 58% from the INR 943.4 Crore in the previous fiscal year. Mamaearth derives its revenue primarily from the sale of its products through both online and offline channels.
Taking into account other sources of income, the overall revenue reached INR 1,515.3 Crore in FY23, marking a 57% rise from the INR 964.3 Crore reported in the preceding fiscal year.
In FY23, Mamaearth disclosed an extraordinary loss of INR 155 Crore, attributable to the impairment of goodwill and other intangible assets. Excluding this loss, the company would have posted a net profit of approximately INR 3.7 Crore for the fiscal year in question.
The direct-to-consumer (D2C) brand recorded a goodwill write-off of INR 136 Crore for Just4Kids Services Private Limited, which is the parent company of Momspresso.
According to Mamaearth’s draft red herring prospectus (DRHP), Momspresso had a net value (assets minus liabilities) of INR 16.2 Crore at the moment of its acquisition in December 2021. Nevertheless, Mamaearth acquired a controlling interest in Momspresso for INR 152.3 Crore and allocated INR 136 Crore for “goodwill generated from the acquisition.”
Mamaearth’s Overall Expenditure!
Similarly, Mamaearth’s overall expenditure experienced a 59% upswing, reaching INR 1,501.6 Crore in FY23, compared to INR 942 Crore in the preceding year, aligning with the growth in its operating revenue.
The D2C brand allocated INR 530 Crore to advertising, marking the highest expenditure in this category. This represented a 35% rise from INR 391.4 Crore in FY22. Advertising expenses constituted 35% of the total expenses.
In FY23, the startup invested INR 502 Crore in the acquisition of raw materials, reflecting a notable increase of 65% compared to the INR 304.7 Crore spent in the prior fiscal year.
In the fiscal year being assessed, Mamaearth disbursed INR 164.8 Crore for employee benefit expenses, showcasing a significant surge of 109% from the INR 78.8 Crore spent in FY22. According to LinkedIn, Mamaearth maintains a workforce of approximately 500 employees.
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Mamaearth has secured a total of $111 million in funding across various funding rounds, with notable backers including Peak XV Partners, Sofina, Fireside Ventures, and Stellaris Venture Partners. The startup, previously valued at $1.2 billion, is currently preparing for its IPO, scheduled to commence on October 31, 2023.
The company is striving to generate roughly INR 1,700 Crore by means of a blend of a new share issuance and an offer-for-sale, with the aim of achieving an anticipated valuation of approximately INR 10,500 Crore.
In the skincare D2C space, Mamaearth competes with the likes of Wow Skin, Juicy Chemistry, Good Glamm, and Nykaa.
