Ahead of its initial public offering (IPO), Mamaearth has apparently covertly terminated its first and most expensive acquisition – Momspresso.
For the past 48 hours, accessing Momspresso’s website and app has proven futile. The website displayed an error message, stating, “Unable to locate the server,” while the app simply indicated, “Something went wrong.”
It’s worth noting that Mamaearth has apparently distanced itself entirely from Momspresso, as the parent company has removed the name from the list of brands it possesses on its website.
A questionnaire sent to Mamaearth inquiring about the development has not received a response as of the time of publishing this story.
Mamaearth Shutting Down Momspresso Divisions:
It is important to highlight that in July of this year, it was reported that Mamaearth was closing down two divisions of Momspresso – Momspresso MyMoney and its brand marketing sector. Prior to discontinuing these segments, the company had laid off 80-100 employees earlier in the year.
According to Mamaearth’s red herring prospectus (RHP), the company’s board made a decision in a meeting held in March 2023 to “downsize” most of Momspresso’s business segments.
The RHP indicated that Momspresso’s performance and profitability were in decline, with the business notably falling short of its FY23 business plan during the fourth quarter of FY23.
“Further the business synergies envisaged from the investment could not be realized despite best efforts of the management. The management also presented multiple scenarios with medium term to long term estimates for the acquired business but none of the scenarios demonstrated considerable improvement in profitability profile and any sight of realizing synergies for the core product business,” the RHP said.
It appears that the choice to divest from Momspresso aligns with Mamaearth’s strategy to distance itself from financially draining subsidiaries in preparation for its stock market listing.
With the exception of Momspresso (Just4Kids Services Private Limited) and Honasa Consumer General Trading LLC, Mamaearth’s other subsidiaries, including BBlunt, B:Blunt Spratt, and Fusion (Dr. Seth’s), maintained profitability during the initial quarter of the current fiscal year.
Notably, Honasa Consumer General Trading LLC recorded a minor loss of INR 40 lakh in Q1 FY24, while Just4Kids incurred a substantial loss of INR 5.4 crore for Mamaearth.
Adding to the challenges, Honasa Consumer Limited had to recognize a significant goodwill impairment loss of INR 136 crore, resulting in a net loss of INR 151 crore.
Mamaearth incurred a goodwill write-off of INR 136 crore for Just4Kids. In total, the company reported exceptional items before tax amounting to INR 155 crore in FY23, primarily due to the impairment of goodwill and other intangible assets. Excluding these exceptional items, the startup would have posted a net profit of approximately INR 3.7 crore for the year under review.
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According to Mamaearth’s draft red herring prospectus (DRHP), the net value (assets minus liabilities) of Momspresso stood at INR 16.2 crore at the time of its acquisition. Additionally, the D2C unicorn also disbursed INR 136 crore for the “goodwill arising from the acquisition.”
Subsequently, the startup raised its ownership stake in Momspresso, resulting in a total acquisition cost of INR 167.9 crore.
Conclusion:
Established in 2016 by Vishal Gupta, Prashant Sinha, and Asif Mohammed, Momspresso offered parenting guidance and pregnancy advice to mothers. The content was predominantly created by women in English, Hindi, and eight additional regional languages.
In FY23, Momspresso recorded an operational revenue of INR 40.4 crore and incurred a net loss of INR 21 crore.
Gupta and Sinha have recently introduced a new marketing agency called Pravis.
In the meantime, Mamaearth’s IPO is scheduled to commence on October 31 and conclude on November 2. According to its RHP, the public offering will consist of a fresh issue of shares valued at INR 365 crore and an offer for sale of 41.25 million shares.
