The fresh infusion of capital will likely value the direct-to-consumer (D2C) brand at about $700 million from around $200 million in 2020, indicating continued investor interest in D2C brands overall. D2C brands have gained amid the Covid-19 pandemic as shoppers increasingly purchase online.
The financing round is expected to be in the range of $60-$80 million, with a primary component of around $50 million.
Sofina is believed to have already picked up a stake in Mamaearth through a secondary share sale, a process where the money does not flow into the company directly but goes to investors selling their stakes.
“There has been a recent secondary sale including from their (Mamaearth) staff as well as from Sofina which has picked up a stake. Sofina is now leading the round which will be finalised by this month,” one of the people said on condition of anonymity.
Private equity firm Kedaara Capital had also held talks with Mamaearth, but it was not immediately clear whether it would participate in the new round, said two people in the know.
Mamaearth’s cofounder Varun Alagh declined to comment.
Sofina and Kedaara Capital did not respond to emails till press time Wednesday.
ET was the first to report about the fundraising on April 23.
D2C brands & rising revenues.
Mamaearth’s financing comes at a time when other D2C brands are also gaining traction across categories – such as boAt in electronics, Sugar Cosmetics for makeup, and Bombay Shaving Company (BSC) in men’s grooming.
Multinational consumer goods brand Reckitt Benckiser picked up a stake in BSC in January, while US-based Colgate-Palmolive is an existing investor.
According to a report from the equity research unit of investment bank Jefferies, Mamaearth is estimated to have clocked revenues of Rs 500 crore for the financial year ending March 31, 2021 compared to around Rs 109 crore a year ago.
Founded in 2016, Mamaearth’s current revenue run rate is around $100 million, or roughly Rs 700 crore.
Mumbai-based investment bank Avendus Capital said in a report last year that D2C brands could become a $100 billion market by 2025.
The growth in D2C brands has been attributed to multiple factors including increased consumer awareness and willingness to try out new brands – even at a premium price point – with the growth in online shoppers.
“The market has changed, and consumers don’t mind buying directly. The interest (in D2C brands) is at an all-time high. Brands have done good sales and investors notice that. That has created strong interest from investors in this space besides the FOMO (fear of missing out) factor,” said Aman Gupta, cofounder of boAt.
The electronics maker surpassed sales of over Rs 1,000 crore in the last financial year though final figures have yet to be released.
For the financial year ending March 31, 2020, it clocked sales of Rs 700 crore.
Private equity major Warburg Pincus invested $100 million in boAt in January.
According to the Jefferies report, 35% of Mamaearth’s revenue comes from its own D2C platform, while offline channels account for 20% and the rest is from various online marketplaces.
Despite its mass premium positioning, Mamaearth has expanded beyond the top-tier metros.
“Mamaearth will use the new capital to expand heavily in the offline channel too. Other D2C brands are also doing the same,” one of the people mentioned earlier in the story said.
“The offline market is huge. If offline brands are coming online, then online-first brands will also go offline. It’s a big market,” boAt’s Gupta added.