Mamaearth IPO Valuation: Key P/E Ratio Concerns? What Investors Should Know

Mamaearth IPO Valuation: Key P/E Ratio Concerns? What Investors Should Know

January 10, 2023: Ever since MamaEarth’s parent Honasa Consumer Ltd filed papers with capital markets regulator Sebi to raise funds through an IPO, experts and investors have been raising concerns about its high valuation.

Many compared the Mamaearth IPO to digital payments giant Paytm, which entered the IPO market at a valuation of $19 billion at the top end of its price band.

Mamaearth IPO Valuation:

MamaEarth, a beauty and personal care brand co-founded by former ‘Shark Tank India’ judge Ghazal Alag, has raised Rs. 24,000 crore seeking an IPO valuation.

Honasa Consumer filed its draft red herring prospectus (DRHP) with Sebi on December 29 to raise around Rs. 2,900 crore to be collected.

That per share is Rs. plans to offer equity shares with a face value of 10 Its IPO raised Rs. Includes offer of new equity shares of up to 400 crores and offer for sale (OFS) of 46,819,635 equity shares.

In January 2022, the beauty care company was last valued at $1.2 billion; But its upcoming IPO a year later is currently being valued at $3 billion.

Why worry about valuation?

Experts and investors are wary of such lofty valuations, given what happened to the stocks of several new-age internet startups listed on the bourses like Paytm, Nykaa and Zomato recently.

All these companies suffered huge losses. Given the subdued mood in the market, many, including Snapdeal, have delayed or shelved their IPO plans.

The company, which became a unicorn in January 2022, posted a revenue of Rs. 14 crore in net profit — representing a price-to-earnings ratio of around 1,714x. Citing the P/E ratio, many investors declared that they would stay away from this IPO.

As per the draft prospectus, MamaEarth in FY2020-21 will invest Rs. 1,332 crore and in FY 2019-20 Rs. 428 crore net loss was recorded.

“For FY2020, 2021, and 2022 and the six-month period ended September 30, 2022, our revenue from online channels across all our brands, respectively, was Rs. 998.43 million, Rs. 3,742.93 million, Rs. 6,595.34 million and Rs. 4,295.34 million and Rs. 4,2919.199.. %, 81.37%, 69.91% and 59.37% from our operations respectively,” the company said in its draft IPO papers.

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