Beauty retailers and brands with omnichannel strategies are garnering significant investments from venture capital and private equity firms, fueled by increasing demand following the Covid-19 pandemic.

Abu Dhabi’s sovereign fund ADIA recently spearheaded a $100 million investment in Mumbai’s Purplle, a beauty retailer, comprising both primary and secondary funding. The investment values Purplle at $1.2-1.3 billion, marking a 15% increase from its last funding round, according to sources familiar with the matter.

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Creaegis, a private equity fund led by former Premji Invest partner Prakash Parthasarathy, known for its investments in Third Wave Coffee, is poised to participate in Purplle’s upcoming funding round as a new investor. Discussions are reportedly in the final stages of completion. Additionally, Premji Invest, an existing investor in Purplle, has reaffirmed its commitment to the company, according to sources familiar with the situation.

During a secondary share sale, current shareholders sell their shares to new investors, and the proceeds do not directly benefit the company’s finances.

MCaffeine, known for its caffeine-infused skincare and haircare products, is currently in the midst of raising funds. Sources familiar with the situation reveal that the company is considering engaging strategic investors in addition to ongoing discussions with financial investors for its upcoming funding round.

“ADIA has spearheaded this funding round. Additionally, a few smaller family offices are also participating through a fund dedicated to managing investments for high net worth individuals,” disclosed one individual familiar with the matter.

The company is anticipated to officially announce the round within the upcoming days.

A representative from ADIA declined to provide a comment, and emails sent to Purplle founder Manish Taneja and a spokesperson for Creaegis did not yield any response.

MCaffeine founder Tarun Sharma refuted any involvement with “strategic investors” for funding purposes.

The funding would be directed towards MCaffeine’s parent company, PepTechnologies, which also encompasses the newly introduced skincare brand, Hyphen.

Emergence of New Beauty Brands

Experts anticipate the emergence of several INR 400-500 crore beauty brands in India, despite the increased presence and competition from major players like Nykaa, Myntra, Reliance’s Ajio, and Tira in the beauty sector.

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Over the past few months, skincare brand Foxtail secured funding from Panthera Growth Partners, while haircare brand Traya received capital from Xponential Capital.

“Both Traya and Foxtail received offers from several investors to lead their funding rounds,” stated an individual familiar with the details. “Following the recent funding, these companies have doubled their monthly sales to approximately INR 15 crore. Moreover, their high gross margin business models have garnered investor interest in achieving profitability at scale.”

In March, Honasa Consumer, the parent company of Mamaearth, introduced a budget-friendly beauty brand called Staze 9to9. Meanwhile, its skincare brand, The Derma Co, which is backed by active ingredients, achieved an annual revenue run rate (ARR) of INR 500 crore in April.

“Companies are introducing new brands to stimulate growth,” remarked an individual monitoring deals within the beauty sector. “Newer brands are growing faster and reaching significant milestones than older brands, despite often relying on premium pricing strategies. Hyphen has been launched with a similar strategic approach,” the individual added.

Although the increase in brands intensifies competition, “new-age brands are distinguishing themselves across various aspects beyond just pricing,” noted one of the aforementioned sources. “Despite the heightened demand, certain companies haven’t experienced substantial growth, underscoring the significance of product quality,” the source emphasized.

Platform Expansion into Beauty

In May, Myntra CEO Nandita Sinha emphasized that beauty is one of the primary focus areas for the company moving forward.

A recent report from BofA Securities indicated that beauty products are experiencing accelerated growth on quick-commerce platforms. There have been reports of platforms such as Blinkit, Zepto, Swiggy Instamart, and BigBasket’s BB Now expanding their offerings to include more beauty products.

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