On Wednesday 4th January 2023, personal care brand Mamaearth’s co-founder took to Twitter to respond to rumours that the company’s proposed IPO is highly overvalued. After Mamaearth owner Honasa Consumer filed the Draft Red Herring Prospectus (DRHP) to the market regulator Securities and Exchange Board of India (SEBI) for raising capital through an IPO, it is being speculated in the media that the IPO values the company at ₹24,000 crore. Following the reports, social media users are claiming that it is highly overvalued.
However, Ghazal Alagh refuted the claims saying that the valuation figure is purely speculative and the company has not released any valuation number. She said in her thread of tweets that there is no mention of valuation in the Draft Red Herring Prospectus (DRHP) filed with the SEBI to raise around ₹2,900 crores through an initial public offering (IPO). She added that the valuation of the company will be discovered during the process of issuing the IPO, and it has not been determined yet.
Ghazal Alagh wrote, “Sharing a thread to throw some clarity on all the noise around valuations around our prospective IPO. In our DRHP as is the standard practice there is no mention of valuation. Valuation discovery is a process which will take place over time as we get into deeper conversations with the investor community.”
In our DRHP as is the standard practice there is no mention of valuation. Valuation discovery is a process which will take place over time as we get into deeper conversations with investor community. (2/6)
— Ghazal Alagh (@GhazalAlagh) January 4, 2023
The Mamaearth co-founder also refuted allegations on social media that the founders are trying to sell their stake through the IPO. She stressed that the founders love the company just like parents love their children, saying that they will never leave the company.
She further said in her tweet, “We have not quoted or subscribed to the valuation numbers which are getting mentioned in various posts on social media. We have built this company and our brands with a lot of love, the same way we have raised our children. The way one never leaves the side of their children we firmly stand behind building our brands and this company for times to come. We started Mamaearth with the purpose of providing toxin-free products for babies since we ourselves could not find the right products for our babies.”
The way 1 never leaves the side of their children we firmly stand behind building our brands and this company for times to come. We started Mamaearth with the purpose of providing toxin free products for babies since we ourselves could not find the right products for our baby(4)
— Ghazal Alagh (@GhazalAlagh) January 4, 2023
Ghazal Alagh added, “God has been kind, luck favored us, consumers loved us and our team has put in crazy efforts to take it to a level where we are today with 6 amazing brands serving millions of Indian consumers. Even in the eye of the storm, we will keep working hard, innovating, and building a business that our next generations can be proud of.”
Even in the eye of the storm we will keep working hard, innovating and building a business that our next generations can be proud of. (6/6)
— Ghazal Alagh (@GhazalAlagh) January 4, 2023
Twitter users criticized the valuation of Mamaearth
On December 29, Honasa Consumer, the parent company of Mamaearth, filed Draft Red Herring Prospectus (DRHP). In its Draft Red Herring Prospectus, Mamaearth said it is planning to raise as much as Rs 2,400 crore through its IPO. It expects to raise about Rs 400 crore through a fresh issue of shares and the rest through an Offer For Sale (OFS) of about 4.7 crore shares.
At the end of FY22, Mamaearth posted a net profit of Rs 14.4 crores and revenues of Rs 943 crores. With speculations abounding that the organization is looking at a $3 billion market capitalization (Rs 24,000 crores), the organization’s price-to-earnings ratio would be about 1,666x, raising caution among investors and market experts, who assert that the valuation of the brand is exorbitant.
Several social media users raised the alarm over Mamaearth IPO and exercised retail investors to exercise caution over applying for the Initial Public Offering in an already volatile market, especially after their unpleasant experience with Zomato and PayTM shares, which have had similar over-valuation concerns.
