NEW DELHI: Days after it was widely trolled for seeking an exorbitant valuation, Mamaearth’s co-founder Ghazal Alagh on Wednesday responded to reports that the start-up’s parent company Honasa Consumer is seeking a Rs 24,000 crore (USD billion) valuation in its prospective IPO, a price-to-earnings (PE) ratio of over 1,700x.
Alagh said in their draft red herring prospectus (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… We have not quoted or subscribed to the valuation numbers which are getting mentioned in various posts on social media,” she said in a Twitter post.
Mamaearth’s proposed Rs 2,900 crore IPO has raised serious valuation concerns. The company was last valued at $1.2 billion in January 2022. One year later, Honasa, according to reports, is seeking a valuation of $3 billion through its IPO.
Many users on Twitter called Mamaearth ‘another Paytm in the making’ as the fintech giant which was seeking a Rs 1.4 lakh crore valuation at the time of IPO in late 2021 is currently valued at about Rs 35,000 crore. Alagh's statement’s gained significance since market regulator Sebi, post the debacle of Paytm on the exchanges had taken a tough stance on ‘valuation’ to protect the interest of retail investors.
Add to it, retail investors who have been “once bitten, twice shy” would not be willing to invest in a barely profit-making firm seeking a very high valuation. Start-ups like Snapdeal, Mobikwik and Boat have postponed their IPO plans. At the end of FY22, Honasa Consumer posted a net profit of Rs 14 crore and revenues of `943 crore.
It had reported losses of Rs 1,332 crore in FY21 and Rs 428 crore in FY20. Suman Bannerjee, CIO, of Hedonova, an AIF firm investing in alternative assets such as NFTs, crypto and P2P lending, said on Wednesday Mamaearth will see a 70% drop in share prices one year after the IPO and this is a class action lawsuit waiting to happen.