Valuation : From Kitchen Remedies to Unicorn Status

It started with a diaper rash. Literally.

In 2016, when Varun and Ghazal Alagh couldn’t find safe, toxin-free products for their baby, they decided to make their own. What began as a personal solution quickly evolved into a full-blown business idea — and just like that, Mamaearth was born.

But this wasn’t just any beauty brand. It came at a time when Indian consumers were waking up to ingredient labels, questioning parabens and sulphates, and leaning into “clean beauty.” Mamaearth positioned itself as the answer — natural, ayurvedic, eco-conscious. The startup tapped into a rising sentiment that wasn’t just skin deep: people didn’t just want to look good; they wanted to feel good about what they were using.

The clean beauty movement had arrived. And Mamaearth became its poster child.

In just six years, it did the unthinkable — went from being a homegrown D2C brand to becoming India’s first unicorn in the personal care space. But like every beauty influencer’s reel, there’s a “behind the scenes” story. And that story, especially after the IPO, got… complicated.

Building the Brand — With Influencers, Instagram & Ingredients

Mamaearth didn’t take the FMCG route of hoardings and heavy trade discounts. It went D2C, and it went hard.

From mommy bloggers to lifestyle YouTubers, the brand became ubiquitous across every screen. It was influencer marketing before the term had even peaked. And it wasn’t just the medium — it was the message too. Mamaearth marketed “goodness” like a lifestyle. Every ad was an emotional nudge — for the baby you love, for the skin you care for, for the planet you want to protect.

And it worked. By FY22, Mamaearth had 70% of its sales coming from digital-first channels. No kirana shelves, no old-school distribution — just clicks, carts, and CODs. Their catalog also expanded like a Marvel multiverse — from baby lotion and hair oil to vitamin C facewash and onion shampoo (yes, really).

But the biggest weapon in their arsenal wasn’t product variety — it was trust. For a generation of Instagram-first buyers, Mamaearth built a brand that looked authentic. Whether it was paraben-free formulas or recyclable packaging, the storytelling was strong.

The only question: was the business model as strong as the brand?

The Valuation Fairy Tale

When Honasa Consumer (Mamaearth’s parent company) raised funding at a $1.2 billion valuation, the headlines wrote themselves:
“India’s first unicorn in beauty.”
“Direct-to-consumer rocketship.”
“The next Nykaa?”

Investors were hooked. The brand had buzz, revenues were surging, and the clean beauty space was red hot. A perfect cocktail for premium valuations.

In 2021 alone, Honasa raised over ₹500 crore from marquee investors like Sequoia, Sofina, and Evolvence. They were betting not just on revenue — but on potential. The idea was that Mamaearth could become India’s version of Honest Co. — a clean, green, scalable brand with cross-category dominance.

But here’s where things got fuzzy: at its IPO, the company was being valued at nearly 1,200 times its earnings. That’s… a lot of fairy dust. Especially for a company with modest profits and a history of heavy ad spend.

Still, the market sentiment at the time was strong. D2C brands were sexy. Consumer tech was still basking in post-pandemic glow. And Mamaearth had the perfect investor deck — clean ingredients, clean conscience, clean numbers.

Or so it seemed.

Revenue Rocket, Profit Pause

Let’s be clear — Mamaearth was no slouch when it came to revenue.

From ₹22 crore in FY19 to ₹722 crore in FY22, the company was growing at lightspeed. It expanded across categories, added offline stores, launched new sub-brands like The Derma Co., and even explored international markets.

But the bottom line told a different story. Despite the rocket-like top line, profitability was elusive. In fact, it posted a loss of ₹1,332 crore in FY21 before turning a small profit in FY22 — just in time for the IPO.

Coincidence? Retail investors didn’t think so.

Critics pointed out a familiar playbook — the “last-mile profit boost” just before listing, often achieved by cutting back on marketing, R&D, or trade discounts to pretty up the books.

But investors, especially post-Nykaa, were more cautious. Revenue growth was impressive, sure. But in an environment where cash burn was getting questioned, profits — real, sustainable profits — mattered more.

IPO Buzz Begins

Despite the murmurs, Honasa went ahead and filed its IPO papers in late 2022. And the buzz was immediate.

It had all the ingredients of a hot IPO:

• First major D2C beauty brand to list
• Promoters with media charisma
• ESG-friendly image
• Revenue growth that looked like a startup, not a soap company

But then came the fine print — a fresh issue of ₹365 crore and an offer-for-sale worth ₹720 crore. Translation: most of the IPO wasn’t to fund growth… it was for early investors to exit.

Retail investors weren’t thrilled. Questions about high valuation, shallow profitability, and aggressive ad spends began surfacing on Twitter, Reddit, even YouTube. The market that once celebrated D2C champions had become wary. Everyone remembered Zomato’s post-IPO dip. Or Paytm’s crash.

And the question hanging in the air was loud and clear:
Was Mamaearth a great brand… but a risky business?

The ₹1,400 Crore Question

Mamaearth’s IPO wasn’t small change.

The company aimed to raise over ₹1,400 crore — ₹365 crore through a fresh issue and the remaining ₹1,035 crore via Offer For Sale (OFS), where existing investors cashed out.

At first glance, this was standard practice. Founders and early backers take some chips off the table, new capital comes in, everyone smiles for the bell-ringing ceremony.

But retail investors saw a different story.

Because while the IPO raised ₹1,400 crore, only 25% of it was actually going to the company. The rest? Early investors exiting.

And this raised eyebrows for two reasons:

1. What were new investors really funding — growth or exits?
2. Was this an IPO for public participation, or a liquidity event for insiders?

Things got murkier when the implied valuation came in: ₹10,500 crore. That translated to a P/E (price-to-earnings) ratio of 1,200x based on FY22 earnings. Even by startup standards, that was eye-watering.

Suddenly, the IPO pitch sounded less like a clean beauty brand going public — and more like a cash-out event dressed in ESG makeup.

Advertising Burn: Branding or Blunder?

Of every ₹100 Mamaearth earned in revenue, over ₹40 went into advertising.

Yes, 40%+ of revenue was spent on marketing. To put that in context — legacy FMCG brands like HUL or Dabur usually cap it at 10–12%. Even most tech startups would flinch.

But Mamaearth’s logic was simple:
“We’re still building the brand.”

And to some extent, it worked. The company had high recall. Its influencer strategy made it almost impossible to scroll through Instagram without seeing an ad or review. Visibility wasn’t the problem.

But sustainability was.

At some point, a brand needs to retain customers without constantly re-acquiring them. That’s where Customer Acquisition Cost (CAC) and Lifetime Value (LTV) metrics matter. Unfortunately, Mamaearth’s filings didn’t offer much transparency there.

So investors were left guessing:
Was Mamaearth buying growth? Or building lasting relationships?

That lack of clarity made the 40% ad spend look less like a growth investment — and more like a red flag.

Profits on Paper, But Not in Pattern

Just before the IPO, Mamaearth did something that raised even more suspicion:
It turned profitable.

In FY21, the company posted a ₹1,332 crore loss. But in FY22? A neat little ₹14 crore profit.

Was this a genuine turnaround? Or a classic IPO warm-up routine — reduce discretionary spends, delay expansions, push for positive EBITDA, and dress up the balance sheet?

To be fair, this isn’t unique to Mamaearth. It’s become almost an IPO ritual for Indian startups to show a “profit patch” before listing — even if it isn’t sustainable.

But investors weren’t buying it. Not this time.

Especially when the core business model (high ad spend, tight margins, heavy D2C reliance) hadn’t fundamentally changed.

This profit felt more like a mirage — and seasoned market watchers knew it.

Is D2C Still a Moat?

In 2020, being a D2C brand was cool.
In 2023, it’s… complicated.

Mamaearth positioned itself as a digital-native brand that didn’t need kiranas, distributors, or shelf wars. That worked — until every other D2C brand flooded Instagram too. Suddenly, the moat didn’t look so wide.

And offline still matters. Over 85% of India’s beauty and personal care market is still offline. The same digital-first model that fueled Mamaearth’s growth also capped its reach.

To expand, Mamaearth had to go hybrid — with physical stores and shelf presence in major cities. But that came with its own challenges:
More logistics. More costs. More brand dilution. Less control.

So the key question became:
Was Mamaearth truly disrupting FMCG — or slowly becoming one?

And if it was walking into the same competitive, margin-squeezed world as HUL and Emami — why give it a startup premium valuation?

Mamaearth’s Core Customer vs Core Investor

Here’s where things got philosophical.

For Mamaearth’s customers, the brand was lovable. Natural ingredients, cool packaging, accessible price points — what’s not to like?

But for investors, the story wasn’t adding up. A strong brand with thin margins, expensive growth, and questionable profitability didn’t inspire much confidence.

This disconnect became painfully visible during the IPO.

While customers loved the onion hair oil and vitamin C serums, retail investors scrolled through the DRHP with skepticism.
No clear LTV/CAC ratios.
No visibility on unit economics.
No convincing roadmap for sustained profits.

And that’s the paradox of new-age consumer brands:
You can win over your market… but still lose the market’s trust.

Vanity Metrics vs Viable Metrics

Revenue is exciting.
But in the world of public markets, revenue without context is just… noise.

Mamaearth proudly displayed its topline growth — jumping from ₹22 crore in FY19 to over ₹700 crore in FY22. And yes, that’s impressive. But what it didn’t offer — or chose not to highlight — were the metrics that actually drive long-term value.

Where were the CAC (Customer Acquisition Cost) numbers?
What was the LTV (Lifetime Value) of a typical Mamaearth buyer?
How was ROAS (Return on Ad Spend) trending year-on-year?

For a digital-first D2C brand, these aren’t just metrics — they’re the business model.

But these key levers were missing from their investor narrative. And what filled the vacuum? Vanity metrics. Things like “number of SKUs,” “social media followers,” or “growth in website visitors.” Nice for a pitch deck. Not enough for a red herring prospectus.

In contrast, other startups that went public (like Zomato or Nykaa) at least attempted to share these growth engine metrics — even if the numbers were ugly. Transparency earns trust. Absence earns skepticism.

And Mamaearth, unfortunately, stayed in the beauty aisle — all gloss, little grit.

The Story They Didn’t Tell

Mamaearth had a powerful brand story.
But it didn’t have a convincing business story.

The investor presentations and DRHP filings leaned heavily on emotional branding — safe for babies, good for the planet, toxin-free lifestyle. These are great for converting customers. But capital markets run on a different currency: data.

Investors weren’t just looking for growth — they wanted growth backed by visibility. And that meant real dashboards:

• Category-level margins
• Retention and repurchase rates
• Channel profitability (D2C vs marketplace vs offline)
• Segment-wise CAC efficiency
• Operational cost structures

Instead, what they got were broad strokes and positive tone. No depth. No dashboards.

Compare this to say, Mamaearth’s peer in the public market — Nykaa. Despite its own share of IPO backlash, Nykaa’s DRHP included breakdowns on margins across categories, private label contribution, and even customer loyalty ratios.

Mamaearth stayed silent — and silence, in finance, often gets interpreted as there’s something to hide.

Missing the Profitability Plot

When you’re burning cash to build a brand, the assumption is:
“I’m spending ₹X now to earn ₹3X later.”

But what if there’s no clarity on the ‘later’ part?

That’s where unit economics become essential — because they tell you whether the business is fundamentally profitable at a per unit level, regardless of overall P&L numbers.

Here’s what Mamaearth could’ve shown (but didn’t):

• How much does it cost to acquire a customer for onion shampoo?
• What margin does that product earn after discounts and delivery?
• What’s the repurchase frequency — and is it strong enough to recover CAC in 3 or 6 months?

Even if the business wasn’t EBITDA-positive yet, showing strong unit economics would’ve signaled a scalable model. It would’ve said:
“We’re not profitable today — but we can be at scale.”

But without that visibility, investors feared the worst: a treadmill business, running fast but getting nowhere.

What Investors Actually Wanted

Retail investors didn’t need a crash course in clean beauty.
They needed a crash course in how this brand would make money.

Unfortunately, what they got was a brand deck masquerading as a financial roadmap.

In today’s market, storytelling alone isn’t enough. You need storytelling that’s backed by dashboards.

Here’s what would’ve made a difference:

• Quarterly CAC/LTV dashboards with historical comparison
• Gross margin trends by product segment
• ROI on digital marketing by channel (Meta, Google, influencers)
• Clear targets for offline revenue contribution
• Repeat vs new customer revenue mix

Even a simple cohort analysis — showing how a customer acquired in Q1 spends in Q2 and Q3 — would’ve demonstrated maturity.

But instead of playing offense with data, Mamaearth played defense with vibes. And the market responded with caution.

The Trust Deficit

In the end, it wasn’t just about numbers — it was about narrative credibility.

Mamaearth could’ve owned the IPO narrative. It had a compelling consumer brand, decent revenue growth, and a relatable founder story. All it needed was to wrap that in clear, data-led communication.

Instead, the company underdelivered on transparency — and overindexed on hope.

That led to what we call a trust deficit — where investors began to question not just the valuation, but the intent. Was the company holding back data? Was the profitability real? Was this IPO truly for growth — or just an exit route?

That trust deficit widened post-IPO, with critics pointing to tepid post-listing performance and limited post-IPO engagement from the company.

And in the public markets, perception lags are hard to fix. Once investors lose trust, you need a lot more than facewash and vitamin C serum to win them back.

Can Mamaearth Rebuild Its Glow — Or Was the Shine Only Skin Deep?

From IPO Backlash to Investor Education

The listing was done. The criticism had been loud. But now comes the hard part — rebuilding trust.

Mamaearth’s post-IPO journey can’t be about just product launches or new influencer campaigns. It has to include a complete rethink of its investor communication playbook.

Because here’s the reality:
You can’t talk to the stock market like you’re talking to Instagram.

Retail investors don’t want polished ads. They want transparency. They want to know:

• Why are margins thin despite scale?
• What’s the long-term CAC trend?
• When will the brand turn cash flow positive?

This means Mamaearth — or rather, Honasa Consumer Ltd. — has to grow into its new identity. It’s no longer just a startup. It’s a listed company now. And that means:

• Quarterly earnings that go beyond boilerplate language
• Analyst calls that discuss both performance and pivots
• Investor decks that explain, not just impress

Startups grow through hype.
Public companies grow through credibility.
Mamaearth now needs to master the latter.

The Sustainable Beauty Battlefield

While Mamaearth was busy navigating IPO headlines, the beauty market wasn’t standing still.

Brands like Plum, Minimalist, Dot & Key, and Wow Skin Science have aggressively entered the clean beauty space — often with:

• Sharper pricing
• Science-backed formulations
• Transparent ingredient sourcing
• Lower burn rates

What started as Mamaearth’s first-mover advantage has quickly become a crowded battlefield. Even legacy players like HUL and Marico have launched their own “natural” verticals with D2C appeal.

So the question now isn’t just: “Is clean beauty still trending?”

It’s: “Why should customers pick Mamaearth over 20 other ‘natural’ brands?”

To survive the next wave, Mamaearth must double down on:

• Ingredient credibility (backed by R&D, not just storytelling)
• Product innovation (beyond me-too launches)
• Category depth (moving from single-product reliance to complete routines)

The ESG narrative helped Mamaearth win hearts. But the efficacy narrative is what will protect it from erosion.

Enterprise Strategy Beyond D2C

If the D2C channel brought Mamaearth fame, enterprise strategy will bring it fortune.

And here, the company is already signaling a pivot:

• Increasing presence in general trade and modern retail
• Scaling partnerships with offline retail chains like Reliance and Shoppers Stop
• Expanding into GCC markets and Southeast Asia

This hybrid model matters — because India still buys most personal care products offline. And global markets are warming up to India-born clean beauty brands.

But going offline brings new challenges:

• Higher margins for distributors
• Inventory and working capital complexity
• Warehousing and return logistics

To succeed, Honasa will need operational discipline — not just marketing swagger.
More supply chain analysts. Fewer slogan writers.

And perhaps most importantly — a clear articulation of how each channel contributes to overall profitability.

Because omnichannel works best when it’s orchestrated, not just experimented with.

Data-Driven Branding — Not Just Emotional Ads

This may be the most crucial pivot Mamaearth needs to make:
Marrying its storytelling chops with data intelligence.

For years, the brand thrived on emotion — safe for babies, toxin-free, natural lifestyle. But now, it must balance that with data-backed insights:

• Which SKUs are driving repeat purchases?
• Which customer segments show the highest LTV?
• What combination of channel + product + geography yields best margins?

This isn’t just for investor decks. It’s for internal decisions too.

The next generation of consumer brands won’t just tell great stories. They’ll build those stories on performance analytics. And that’s where Mamaearth must grow up — from being a content powerhouse to becoming a consumer intelligence engine.

Emotional branding got Mamaearth to IPO.
Data-driven branding will decide what happens after.

The Redemption Arc: Glow or Go Home?

Can Mamaearth reclaim its narrative? Or has the IPO backlash permanently dulled the shine?

The answer depends on whether it chooses reinvention over reaction.

If it continues to hide behind “brand love” without hard metrics, the market may move on. But if it leans in, embraces radical transparency, and shows progress on profitability — it has every chance to script a comeback.

Because the core business is still solid:

• A trusted consumer brand
• Strong revenue base
• Multi-category play
• Omnichannel potential

What’s missing is clarity, credibility, and communication.

Glow is great.
But investors want grit.

So here’s the fork in the road:
Will Mamaearth evolve into a new-age FMCG powerhouse — or become a cautionary tale for D2C IPOs?

As always, the numbers — and the narrative — will decide.

Bibliography
LiveMint – “Mamaearth IPO valuation concerns: A look at firm’s finances and risks”
Reuters – “Indian skincare firm Mamaearth’s parent puts IPO on hold

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