Mamaearth was co-founded as a direct-to-consumer brand by Varun Alagh, a former Hindustan Unilever executive, and his wife Ghazal 
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Mamaearth was co-founded as a direct-to-consumer brand by Varun Alagh, a former Hindustan Unilever executive, and his wife Ghazal Ever since Mamaearth's parent company, Honasa Consumer Ltd, filed IPO papers with Sebi, its valuation has been fodder for ridicule on social media platforms. Many Twitter users wondered what the personal care products startup achieved in the last one year to demand three times surge in its valuation at $3 billion.
The social media chatter got so deafening that Mamaearth's founders issues a clarification on Wednesday saying they neither quoted nor do they subscribe to the valuation numbers doing the rounds. The company was last valued at $1.2 billion in January 2022 when it raised $52 million from investors, including US-based Sequoia and Belgium's Sofina. It is said to be looking at a target market capitalisation of $3 billion (about Rs 24,000 crore) with the size of its IPO, which includes Rs 2,400-crore OFS.
The company reported a net profit of Rs 14 crore in FY22. That works out to a price-to-earnings ratio of about 1,714x. The company reported a net loss of Rs 1,332 crore in FY21 and Rs 428 crore in FY20, as per the draft prospectus. The P/E ratio helps investors determine whether the stock of a company is overvalued or undervalued compared to its earnings.
While quoting NSE data, a Moneycontrol report said Nykaa's P/E ratio stands at 960x, while that of Hindustan Unilever is at 62x. P/E ratio of Godrej Consumer, Marico, Colgate Palmolive stands at 57x, 53x and 38x, respectively. Emami and Bajaj Consumer Care have their P/E ratios at 23x and 18x, respectively.
Gurugram-headquartered Mamaearth was co-founded as a direct-to-consumer brand by Varun Alagh, a former Hindustan Unilever executive, and his wife Ghazal.
With the brand endorsed by popular Bollywood celebrities, the duo has cashed in on India's growing e-commerce adoption by offering its products on platforms such as Amazon and Walmart's Flipkart. In fact, the company has popular Bollywood actor Shilpa Shetty among its early backers, who is looking to exit through the IPO. Honasa said it would use about Rs 186 crore from the Rs 400-crore IPO for advertising expenses.
"Valuation discovery is a process which will take place over time as we get into deeper conversations with investor community. We have not quoted or subscribe to the valuation numbers which are getting mentioned in various posts on social media," Ghazal and Varun Alagh said in a statement.
"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," the Mamaearth founders stated.
"Mamaearth IPO aims for 1700 multiple of profits. As compared to peer companies, HUL is trading at 60 multiple. In simple terms, for every 1 rupee profit, investors are willing to pay Rs 1,700 to Mamaearth vis-à-vis Rs 60 to HUL," said a Twitter user.
Finfluencer Akshat Shrivastava said HUL's last year profit was Rs 9,000 crore and valuation is Rs 6 lakh crore, which works out to P/E ratio of 66x while calling Mamaearth as a "new Adani in the Stock Market".
"Mamaearth seeking higher valuations than HUL is similar to a local councillor claiming to be more powerful than Modi," said another Twitter user.
Shares of cosmetics-to-fashion platform Nykaa made a blockbuster opening in November 2021, valuing the company at nearly $13 billion.
Shares of FSN E-Commerce Ventures, the parent company that owns the Nykaa brand, soared 89.2% to Rs 2,129 after opening at Rs 2,018 in pre-open trade.
The debut price was at a 79.4% premium to the initial public offering (IPO) price of Rs 1,125, giving the company a valuation of Rs 95,437 crore ($12.86 billion).
New-age tech stocks including Nykaa, Paytm and Zomato have all declined more than 50 per cent since listing. Nykaa's shares have been under pressure ever since the IPO lock-in period ended. Several fund houses and investors have offloaded their stake in the company since November 10, thus dragging the stock down.
Meanwhile, netizens didn't waste time to point out the irony that Mamaearth’s co-founder Ghazal Alagh, as a judge on first season of 'Shark Tank India', would often refuse to invest in a startup citing high valuation or growth concerns.
ALSO READ: Mamaearth IPO raises valuation concerns among netizens
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