![SmartSyncServ's tweet photo. Mamaearth got listed 10 days ago.
INR 1700 Cr raised. [Fresh Issue: 335 Cr, OFS: 1336 Cr]
5 years ago:
Revenue: 15 Cr. Valuation: 100 Cr
Today:
Revenue: 1500 Cr. Valuation: 10000 Cr
100x in both the metrics. In just 5 years.
Let’s deep dive into the business here.
We will break down this post on Mamaearth [Honasa Consumer Ltd] into the following main categories:
Origins & Founders
Business
Strategy
Financials
Risks
Valuation
Origins & Founders
They say, “Necessity is the mother of invention”. Mamaearth’s co-founders and husband-wife duo Varun and Ghazal Alagh proved this right with their efforts.
Mamaearth was born out of parental stress. When the Alagh couple were grappling with the problem of treating their infant son’s skin condition with products available in the Indian market, they went to the root of the problem.
This is what Ghazal said in an interview about her worries:
“We found there were certain toxins that were banned in countries outside India and were declared to be harmful to baby skin, but were still being widely used here. And that is what led us to think that somebody should do something about it.”
This was in 2016. Now that you have got an idea of the origin story, let’s deep dive into the business.
Business
Mamaearth is the largest digital-first beauty and personal care (“BPC”) company in India. Since its inception, they have developed products that address beauty and personal care problems faced by consumers. Their products are built to service a core customer need for safe-to-use, natural products, and focus on developing toxin-free beauty products made with natural ingredients.
Their ability to identify and cater to emerging trends has enabled them to develop repeatable brand-building playbooks that have helped in scaling our newer brands at a fast pace. These playbooks are powered by their consumer-centric approach across various aspects of their business model, including their innovation engine, digital-first omni-channel distribution, and technology and data-driven marketing and consumer engagement model.
Since launching Mamaearth in 2016, they have added five new brands to the portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s, and have built a ‘House of Brands’ architecture. As of June 30, 2023, their portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments
A glimpse of all the brands below:
Source: DRHP
Now let’s look at the competitive strengths they are banking on.
Competitive Strengths
Source: DRHP
Let’s touch upon all the above six competitive strengths one by one.
Brand-building capabilities and repeatable playbooks
They have developed a brand-building playbook that enables them to replicate their success with Mamaearth across newer brands. These playbooks extend from their innovation engine to their distribution strategy to their marketing and customer engagement capabilities. Leveraging these playbooks, they have demonstrated a track record of introducing new brands to the market.
Two things stand out for them as per their claims in the DRHP:
● Ability to acquire new customers and increase share of wallet from existing customers
● Ability to launch new brands at low costs
Consumer-centric product innovation
Product innovation is a key strength of their business. They primarily do it through these key innovation tools:
● Social Listening
● Online Competitive Intelligence
● User Conversational Research
This consumer-insights informed product development has helped them focus on new and emerging trends before they become mainstream opportunities and in turn, has translated into share gain in key categories and need spaces.
Digital-first omnichannel distribution
Their omnichannel network allows them to be present across various touchpoints and serve their consumers wherever they shop. Their distribution model is led by their digital presence (DTC and e-commerce marketplaces).
More than 60% of revenue was derived from DTC and e-commerce marketplaces in FY23 and the first 3 months of FY24.
Data-driven contextualized marketing
They have adopted a marketing model through which they activate consumer engagement initiatives across multiple media platforms and channels. With a combination of digital and traditional marketing, they deliver a consistent narrative about their brands and their proposition across all touch points relevant for our consumers. Through these initiatives, they aim to target consumers across the entire marketing funnel from creating awareness to driving consideration and conversion for their brands.
In this initiative these 4Cs are the cornerstone of their strategy:
Content
Communicate
Community
Commerce
Robust Growth
As per an independent agency report, Mamaeart is the largest digital-first BPC company in India in terms of revenue. They have grown their revenue at a CAGR of 80.14% between FY21 and FY23 (from ₹459Cr to ₹1493Cr in FY23), while the median revenue CAGR of all other BPC companies for which data was available for the relevant period was 28.00%.
Growth in number of units delivered across all brands.
FY22: 143%
FY23: 68%
Q1FY24: 44%
Founder-led company with a strong professional management
Before founding Mamaearth, Varun worked across marquee companies in India such as Hindustan Unilever Limited, Diageo India Private Limited and Coca-Cola India Private Limited. Ghazal worked with NIIT and operated https://t.co/Bwc7aT6PdP, an independent commercial operation. Ghazal has been associated as a promoter and director since September 16, 2016. Together, their knowledge and understanding of the consumer packaged goods and BPC products space in India have been instrumental in developing and growing the business.
The founders are complemented by a professional leadership team with a combined experience of over 100 years across consumer packaged goods, e-commerce, and DTC companies in India.
Business Strategy
The business strategy is fairly simple and clear. The proof of the pudding, though, lies in the execution and the consistency in the coming years.
Their three-pronged strategy is as follows:
Expand distribution and brand awareness: Continuing brand awareness & expanding offline footprint in general and modern trade retail channels to reach a larger customer base
Incubate or acquire new engines of growth: Launch new brands and continue to drive product innovations across existing brands, develop new channels and strengthen our omni-channel strategy, & selectively expand into new markets.
Strengthen business efficiency drivers: Optimize channel mix for the flagship brand, Mamaearth, and drive scale benefits from core businesses.
Industry Tailwinds
The shift to organized channels is a fairly secular trend across most key retail categories, however, it is more pronounced in categories like BPC, Apparel, and Electronics which lend well to brand creation. The products in these categories are differentiated through brands and their design language is pervasive across various facets of the products. These categories already have much higher organized penetration – more than 7-10x the organized penetration of grocery as of 2022.
Going forward, these categories are likely to become overwhelmingly organized – more than half of the BPC market and more than 90% of the electronics market.
Source: DRHP
Now that we have a fair idea of the business and industry tailwinds, we can move on to the financials
Financials
Source: Value Research
As you can see while they have been able to increase their revenue at a breathtaking speed, profits have been elusive. It is incredibly difficult for a public market investor to bet on these businesses. Because the path to profitability is an uncertain one for them. Plus, if an economic downturn comes up in the next few years, you can safely assume a high growth business will be affected the most if they do not have the profits and reserves to absorb the high losses. Public market investors often forget that they cannot invest the way private market investors do. Hence, either of the two is very important for you to consider investing in these businesses: attractive starting valuation or sustainable profits growing at a high CAGR. Unfortunately, neither of that is in sight as of now.
Before we delve into the valuation game, let’s also look up some fo the glaring risks in this business.
Risks
Product concentration risks: They derive a significant amount of revenue from a limited number of products. In FY21, FY22, FY23, and Q1FY24 they derived 30.38%, 30.17%, 27.38%, and 29.10% of their revenue, respectively, from the sales of their top 10 products.
Supplier Concentration Risks: They do not manufacture any of their products and rely entirely on third-party manufacturers for the manufacturing of all the products. In FY21, FY22, FY23, and Q1FY24, the top three manufacturers for each year/period contributed to 81.95%, 70.97%, 51.73%, and 46.01% of the total value of our purchase of traded goods, respectively.
Their dependence on third-party manufacturers for the manufacturing of all their products subjects them to risks, which, if realized, could adversely affect their business, results of operations, cash flows, and financial condition.
Disclaimer Opinion in Auditor’s report: The Auditor’s report on internal financial controls issued on their standalone financial statements for FY20 contains a disclaimer of opinion relating to the Auditors’ inability to obtain appropriate audit evidence to provide a basis for an opinion on adequate internal financial controls.
Intense Competition: They face intense competition which may lead to a reduction in their market share, cause them to increase their expenditure on marketing and promotion as well, and cause them to offer discounts, which may result in an adverse effect on their business and a decline in their profitability. According to RedSeer, their market share was 1.5% of the total BPC market for the calendar year 2022. For FY21, FY22, FY23, and Q1FY24, their advertisement expenses constituted 38.68%, 41.49%, 35.52%, and 34.99% of their revenue, respectively.
Valuation
At 7 times TTM sales, Mamaearth trades closer to the multiples of HUL, P&G, and other large consumer brands that have decades of track record of sustainable profitable growth. A company that was started 6 years ago, and grown fanatically based on very high A&P costs and big acquisitions has no clear path to profitability and sustainability as of date.
It’s not a question of whether and when will they achieve profitability.
It’s a question for you, a public market investor, when and why will you invest in it?
Our team works really hard to come up with these differential insights on different businesses.
It will do us a world of good if you can "REPOST" this post. It will help us reach out to more investors who may gain from our work. 🙏
If you wish to receive more long posts like this, do let us know in the comment section with a "YES".
If you find value in our research, do follow us @SmartSyncServ
Thank you for reading🙏](https://pbs.twimg.com/media/F_HSjWFWEAAL5m2.jpg)
![SmartSyncServ's tweet photo. Mamaearth got listed 10 days ago.
INR 1700 Cr raised. [Fresh Issue: 335 Cr, OFS: 1336 Cr]
5 years ago:
Revenue: 15 Cr. Valuation: 100 Cr
Today:
Revenue: 1500 Cr. Valuation: 10000 Cr
100x in both the metrics. In just 5 years.
Let’s deep dive into the business here.
We will break down this post on Mamaearth [Honasa Consumer Ltd] into the following main categories:
Origins & Founders
Business
Strategy
Financials
Risks
Valuation
Origins & Founders
They say, “Necessity is the mother of invention”. Mamaearth’s co-founders and husband-wife duo Varun and Ghazal Alagh proved this right with their efforts.
Mamaearth was born out of parental stress. When the Alagh couple were grappling with the problem of treating their infant son’s skin condition with products available in the Indian market, they went to the root of the problem.
This is what Ghazal said in an interview about her worries:
“We found there were certain toxins that were banned in countries outside India and were declared to be harmful to baby skin, but were still being widely used here. And that is what led us to think that somebody should do something about it.”
This was in 2016. Now that you have got an idea of the origin story, let’s deep dive into the business.
Business
Mamaearth is the largest digital-first beauty and personal care (“BPC”) company in India. Since its inception, they have developed products that address beauty and personal care problems faced by consumers. Their products are built to service a core customer need for safe-to-use, natural products, and focus on developing toxin-free beauty products made with natural ingredients.
Their ability to identify and cater to emerging trends has enabled them to develop repeatable brand-building playbooks that have helped in scaling our newer brands at a fast pace. These playbooks are powered by their consumer-centric approach across various aspects of their business model, including their innovation engine, digital-first omni-channel distribution, and technology and data-driven marketing and consumer engagement model.
Since launching Mamaearth in 2016, they have added five new brands to the portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s, and have built a ‘House of Brands’ architecture. As of June 30, 2023, their portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments
A glimpse of all the brands below:
Source: DRHP
Now let’s look at the competitive strengths they are banking on.
Competitive Strengths
Source: DRHP
Let’s touch upon all the above six competitive strengths one by one.
Brand-building capabilities and repeatable playbooks
They have developed a brand-building playbook that enables them to replicate their success with Mamaearth across newer brands. These playbooks extend from their innovation engine to their distribution strategy to their marketing and customer engagement capabilities. Leveraging these playbooks, they have demonstrated a track record of introducing new brands to the market.
Two things stand out for them as per their claims in the DRHP:
● Ability to acquire new customers and increase share of wallet from existing customers
● Ability to launch new brands at low costs
Consumer-centric product innovation
Product innovation is a key strength of their business. They primarily do it through these key innovation tools:
● Social Listening
● Online Competitive Intelligence
● User Conversational Research
This consumer-insights informed product development has helped them focus on new and emerging trends before they become mainstream opportunities and in turn, has translated into share gain in key categories and need spaces.
Digital-first omnichannel distribution
Their omnichannel network allows them to be present across various touchpoints and serve their consumers wherever they shop. Their distribution model is led by their digital presence (DTC and e-commerce marketplaces).
More than 60% of revenue was derived from DTC and e-commerce marketplaces in FY23 and the first 3 months of FY24.
Data-driven contextualized marketing
They have adopted a marketing model through which they activate consumer engagement initiatives across multiple media platforms and channels. With a combination of digital and traditional marketing, they deliver a consistent narrative about their brands and their proposition across all touch points relevant for our consumers. Through these initiatives, they aim to target consumers across the entire marketing funnel from creating awareness to driving consideration and conversion for their brands.
In this initiative these 4Cs are the cornerstone of their strategy:
Content
Communicate
Community
Commerce
Robust Growth
As per an independent agency report, Mamaeart is the largest digital-first BPC company in India in terms of revenue. They have grown their revenue at a CAGR of 80.14% between FY21 and FY23 (from ₹459Cr to ₹1493Cr in FY23), while the median revenue CAGR of all other BPC companies for which data was available for the relevant period was 28.00%.
Growth in number of units delivered across all brands.
FY22: 143%
FY23: 68%
Q1FY24: 44%
Founder-led company with a strong professional management
Before founding Mamaearth, Varun worked across marquee companies in India such as Hindustan Unilever Limited, Diageo India Private Limited and Coca-Cola India Private Limited. Ghazal worked with NIIT and operated https://t.co/Bwc7aT6PdP, an independent commercial operation. Ghazal has been associated as a promoter and director since September 16, 2016. Together, their knowledge and understanding of the consumer packaged goods and BPC products space in India have been instrumental in developing and growing the business.
The founders are complemented by a professional leadership team with a combined experience of over 100 years across consumer packaged goods, e-commerce, and DTC companies in India.
Business Strategy
The business strategy is fairly simple and clear. The proof of the pudding, though, lies in the execution and the consistency in the coming years.
Their three-pronged strategy is as follows:
Expand distribution and brand awareness: Continuing brand awareness & expanding offline footprint in general and modern trade retail channels to reach a larger customer base
Incubate or acquire new engines of growth: Launch new brands and continue to drive product innovations across existing brands, develop new channels and strengthen our omni-channel strategy, & selectively expand into new markets.
Strengthen business efficiency drivers: Optimize channel mix for the flagship brand, Mamaearth, and drive scale benefits from core businesses.
Industry Tailwinds
The shift to organized channels is a fairly secular trend across most key retail categories, however, it is more pronounced in categories like BPC, Apparel, and Electronics which lend well to brand creation. The products in these categories are differentiated through brands and their design language is pervasive across various facets of the products. These categories already have much higher organized penetration – more than 7-10x the organized penetration of grocery as of 2022.
Going forward, these categories are likely to become overwhelmingly organized – more than half of the BPC market and more than 90% of the electronics market.
Source: DRHP
Now that we have a fair idea of the business and industry tailwinds, we can move on to the financials
Financials
Source: Value Research
As you can see while they have been able to increase their revenue at a breathtaking speed, profits have been elusive. It is incredibly difficult for a public market investor to bet on these businesses. Because the path to profitability is an uncertain one for them. Plus, if an economic downturn comes up in the next few years, you can safely assume a high growth business will be affected the most if they do not have the profits and reserves to absorb the high losses. Public market investors often forget that they cannot invest the way private market investors do. Hence, either of the two is very important for you to consider investing in these businesses: attractive starting valuation or sustainable profits growing at a high CAGR. Unfortunately, neither of that is in sight as of now.
Before we delve into the valuation game, let’s also look up some fo the glaring risks in this business.
Risks
Product concentration risks: They derive a significant amount of revenue from a limited number of products. In FY21, FY22, FY23, and Q1FY24 they derived 30.38%, 30.17%, 27.38%, and 29.10% of their revenue, respectively, from the sales of their top 10 products.
Supplier Concentration Risks: They do not manufacture any of their products and rely entirely on third-party manufacturers for the manufacturing of all the products. In FY21, FY22, FY23, and Q1FY24, the top three manufacturers for each year/period contributed to 81.95%, 70.97%, 51.73%, and 46.01% of the total value of our purchase of traded goods, respectively.
Their dependence on third-party manufacturers for the manufacturing of all their products subjects them to risks, which, if realized, could adversely affect their business, results of operations, cash flows, and financial condition.
Disclaimer Opinion in Auditor’s report: The Auditor’s report on internal financial controls issued on their standalone financial statements for FY20 contains a disclaimer of opinion relating to the Auditors’ inability to obtain appropriate audit evidence to provide a basis for an opinion on adequate internal financial controls.
Intense Competition: They face intense competition which may lead to a reduction in their market share, cause them to increase their expenditure on marketing and promotion as well, and cause them to offer discounts, which may result in an adverse effect on their business and a decline in their profitability. According to RedSeer, their market share was 1.5% of the total BPC market for the calendar year 2022. For FY21, FY22, FY23, and Q1FY24, their advertisement expenses constituted 38.68%, 41.49%, 35.52%, and 34.99% of their revenue, respectively.
Valuation
At 7 times TTM sales, Mamaearth trades closer to the multiples of HUL, P&G, and other large consumer brands that have decades of track record of sustainable profitable growth. A company that was started 6 years ago, and grown fanatically based on very high A&P costs and big acquisitions has no clear path to profitability and sustainability as of date.
It’s not a question of whether and when will they achieve profitability.
It’s a question for you, a public market investor, when and why will you invest in it?
Our team works really hard to come up with these differential insights on different businesses.
It will do us a world of good if you can "REPOST" this post. It will help us reach out to more investors who may gain from our work. 🙏
If you wish to receive more long posts like this, do let us know in the comment section with a "YES".
If you find value in our research, do follow us @SmartSyncServ
Thank you for reading🙏](https://pbs.twimg.com/media/F_HSjWEXoAAd2jC.png)
![SmartSyncServ's tweet photo. Mamaearth got listed 10 days ago.
INR 1700 Cr raised. [Fresh Issue: 335 Cr, OFS: 1336 Cr]
5 years ago:
Revenue: 15 Cr. Valuation: 100 Cr
Today:
Revenue: 1500 Cr. Valuation: 10000 Cr
100x in both the metrics. In just 5 years.
Let’s deep dive into the business here.
We will break down this post on Mamaearth [Honasa Consumer Ltd] into the following main categories:
Origins & Founders
Business
Strategy
Financials
Risks
Valuation
Origins & Founders
They say, “Necessity is the mother of invention”. Mamaearth’s co-founders and husband-wife duo Varun and Ghazal Alagh proved this right with their efforts.
Mamaearth was born out of parental stress. When the Alagh couple were grappling with the problem of treating their infant son’s skin condition with products available in the Indian market, they went to the root of the problem.
This is what Ghazal said in an interview about her worries:
“We found there were certain toxins that were banned in countries outside India and were declared to be harmful to baby skin, but were still being widely used here. And that is what led us to think that somebody should do something about it.”
This was in 2016. Now that you have got an idea of the origin story, let’s deep dive into the business.
Business
Mamaearth is the largest digital-first beauty and personal care (“BPC”) company in India. Since its inception, they have developed products that address beauty and personal care problems faced by consumers. Their products are built to service a core customer need for safe-to-use, natural products, and focus on developing toxin-free beauty products made with natural ingredients.
Their ability to identify and cater to emerging trends has enabled them to develop repeatable brand-building playbooks that have helped in scaling our newer brands at a fast pace. These playbooks are powered by their consumer-centric approach across various aspects of their business model, including their innovation engine, digital-first omni-channel distribution, and technology and data-driven marketing and consumer engagement model.
Since launching Mamaearth in 2016, they have added five new brands to the portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s, and have built a ‘House of Brands’ architecture. As of June 30, 2023, their portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments
A glimpse of all the brands below:
Source: DRHP
Now let’s look at the competitive strengths they are banking on.
Competitive Strengths
Source: DRHP
Let’s touch upon all the above six competitive strengths one by one.
Brand-building capabilities and repeatable playbooks
They have developed a brand-building playbook that enables them to replicate their success with Mamaearth across newer brands. These playbooks extend from their innovation engine to their distribution strategy to their marketing and customer engagement capabilities. Leveraging these playbooks, they have demonstrated a track record of introducing new brands to the market.
Two things stand out for them as per their claims in the DRHP:
● Ability to acquire new customers and increase share of wallet from existing customers
● Ability to launch new brands at low costs
Consumer-centric product innovation
Product innovation is a key strength of their business. They primarily do it through these key innovation tools:
● Social Listening
● Online Competitive Intelligence
● User Conversational Research
This consumer-insights informed product development has helped them focus on new and emerging trends before they become mainstream opportunities and in turn, has translated into share gain in key categories and need spaces.
Digital-first omnichannel distribution
Their omnichannel network allows them to be present across various touchpoints and serve their consumers wherever they shop. Their distribution model is led by their digital presence (DTC and e-commerce marketplaces).
More than 60% of revenue was derived from DTC and e-commerce marketplaces in FY23 and the first 3 months of FY24.
Data-driven contextualized marketing
They have adopted a marketing model through which they activate consumer engagement initiatives across multiple media platforms and channels. With a combination of digital and traditional marketing, they deliver a consistent narrative about their brands and their proposition across all touch points relevant for our consumers. Through these initiatives, they aim to target consumers across the entire marketing funnel from creating awareness to driving consideration and conversion for their brands.
In this initiative these 4Cs are the cornerstone of their strategy:
Content
Communicate
Community
Commerce
Robust Growth
As per an independent agency report, Mamaeart is the largest digital-first BPC company in India in terms of revenue. They have grown their revenue at a CAGR of 80.14% between FY21 and FY23 (from ₹459Cr to ₹1493Cr in FY23), while the median revenue CAGR of all other BPC companies for which data was available for the relevant period was 28.00%.
Growth in number of units delivered across all brands.
FY22: 143%
FY23: 68%
Q1FY24: 44%
Founder-led company with a strong professional management
Before founding Mamaearth, Varun worked across marquee companies in India such as Hindustan Unilever Limited, Diageo India Private Limited and Coca-Cola India Private Limited. Ghazal worked with NIIT and operated https://t.co/Bwc7aT6PdP, an independent commercial operation. Ghazal has been associated as a promoter and director since September 16, 2016. Together, their knowledge and understanding of the consumer packaged goods and BPC products space in India have been instrumental in developing and growing the business.
The founders are complemented by a professional leadership team with a combined experience of over 100 years across consumer packaged goods, e-commerce, and DTC companies in India.
Business Strategy
The business strategy is fairly simple and clear. The proof of the pudding, though, lies in the execution and the consistency in the coming years.
Their three-pronged strategy is as follows:
Expand distribution and brand awareness: Continuing brand awareness & expanding offline footprint in general and modern trade retail channels to reach a larger customer base
Incubate or acquire new engines of growth: Launch new brands and continue to drive product innovations across existing brands, develop new channels and strengthen our omni-channel strategy, & selectively expand into new markets.
Strengthen business efficiency drivers: Optimize channel mix for the flagship brand, Mamaearth, and drive scale benefits from core businesses.
Industry Tailwinds
The shift to organized channels is a fairly secular trend across most key retail categories, however, it is more pronounced in categories like BPC, Apparel, and Electronics which lend well to brand creation. The products in these categories are differentiated through brands and their design language is pervasive across various facets of the products. These categories already have much higher organized penetration – more than 7-10x the organized penetration of grocery as of 2022.
Going forward, these categories are likely to become overwhelmingly organized – more than half of the BPC market and more than 90% of the electronics market.
Source: DRHP
Now that we have a fair idea of the business and industry tailwinds, we can move on to the financials
Financials
Source: Value Research
As you can see while they have been able to increase their revenue at a breathtaking speed, profits have been elusive. It is incredibly difficult for a public market investor to bet on these businesses. Because the path to profitability is an uncertain one for them. Plus, if an economic downturn comes up in the next few years, you can safely assume a high growth business will be affected the most if they do not have the profits and reserves to absorb the high losses. Public market investors often forget that they cannot invest the way private market investors do. Hence, either of the two is very important for you to consider investing in these businesses: attractive starting valuation or sustainable profits growing at a high CAGR. Unfortunately, neither of that is in sight as of now.
Before we delve into the valuation game, let’s also look up some fo the glaring risks in this business.
Risks
Product concentration risks: They derive a significant amount of revenue from a limited number of products. In FY21, FY22, FY23, and Q1FY24 they derived 30.38%, 30.17%, 27.38%, and 29.10% of their revenue, respectively, from the sales of their top 10 products.
Supplier Concentration Risks: They do not manufacture any of their products and rely entirely on third-party manufacturers for the manufacturing of all the products. In FY21, FY22, FY23, and Q1FY24, the top three manufacturers for each year/period contributed to 81.95%, 70.97%, 51.73%, and 46.01% of the total value of our purchase of traded goods, respectively.
Their dependence on third-party manufacturers for the manufacturing of all their products subjects them to risks, which, if realized, could adversely affect their business, results of operations, cash flows, and financial condition.
Disclaimer Opinion in Auditor’s report: The Auditor’s report on internal financial controls issued on their standalone financial statements for FY20 contains a disclaimer of opinion relating to the Auditors’ inability to obtain appropriate audit evidence to provide a basis for an opinion on adequate internal financial controls.
Intense Competition: They face intense competition which may lead to a reduction in their market share, cause them to increase their expenditure on marketing and promotion as well, and cause them to offer discounts, which may result in an adverse effect on their business and a decline in their profitability. According to RedSeer, their market share was 1.5% of the total BPC market for the calendar year 2022. For FY21, FY22, FY23, and Q1FY24, their advertisement expenses constituted 38.68%, 41.49%, 35.52%, and 34.99% of their revenue, respectively.
Valuation
At 7 times TTM sales, Mamaearth trades closer to the multiples of HUL, P&G, and other large consumer brands that have decades of track record of sustainable profitable growth. A company that was started 6 years ago, and grown fanatically based on very high A&P costs and big acquisitions has no clear path to profitability and sustainability as of date.
It’s not a question of whether and when will they achieve profitability.
It’s a question for you, a public market investor, when and why will you invest in it?
Our team works really hard to come up with these differential insights on different businesses.
It will do us a world of good if you can "REPOST" this post. It will help us reach out to more investors who may gain from our work. 🙏
If you wish to receive more long posts like this, do let us know in the comment section with a "YES".
If you find value in our research, do follow us @SmartSyncServ
Thank you for reading🙏](https://pbs.twimg.com/media/F_HSjWEW4AERw-d.png)
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Added #mamaearth to my watchlist and not my holding.
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Me right now...
All about mamaearth and its prospects post IPO.
Very well put across by the @SmartSyncServ team.
Technically the stock is back at its listing level after recovering from a 15% fall.
Are you keeping it on your watchlist?
#mamaearth #StocksInFocus #stockmarkets
All about mamaearth and its prospects post IPO.
Very well put across by the @SmartSyncServ team.
Technically the stock is back at its listing level after recovering from a 15% fall.
Are you keeping it on your watchlist?
#mamaearth #StocksInFocus #stockmarkets
Mamaearth got listed 10 days ago.
INR 1700 Cr raised. [Fresh Issue: 335 Cr, OFS: 1336 Cr]
5 years ago:
Revenue: 15 Cr. Valuation: 100 Cr
Today:
Revenue: 1500 Cr. Valuation: 10000 Cr
100x in both the metrics. In just 5 years.
Let’s deep dive into the business here.
We will break down this post on Mamaearth [Honasa Consumer Ltd] into the following main categories:
Origins & Founders
Business
Strategy
Financials
Risks
Valuation
Origins & Founders
They say, “Necessity is the mother of invention”. Mamaearth’s co-founders and husband-wife duo Varun and Ghazal Alagh proved this right with their efforts.
Mamaearth was born out of parental stress. When the Alagh couple were grappling with the problem of treating their infant son’s skin condition with products available in the Indian market, they went to the root of the problem.
This is what Ghazal said in an interview about her worries:
“We found there were certain toxins that were banned in countries outside India and were declared to be harmful to baby skin, but were still being widely used here. And that is what led us to think that somebody should do something about it.”
This was in 2016. Now that you have got an idea of the origin story, let’s deep dive into the business.
Business
Mamaearth is the largest digital-first beauty and personal care (“BPC”) company in India. Since its inception, they have developed products that address beauty and personal care problems faced by consumers. Their products are built to service a core customer need for safe-to-use, natural products, and focus on developing toxin-free beauty products made with natural ingredients.
Their ability to identify and cater to emerging trends has enabled them to develop repeatable brand-building playbooks that have helped in scaling our newer brands at a fast pace. These playbooks are powered by their consumer-centric approach across various aspects of their business model, including their innovation engine, digital-first omni-channel distribution, and technology and data-driven marketing and consumer engagement model.
Since launching Mamaearth in 2016, they have added five new brands to the portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s, and have built a ‘House of Brands’ architecture. As of June 30, 2023, their portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments
A glimpse of all the brands below:
Source: DRHP
Now let’s look at the competitive strengths they are banking on.
Competitive Strengths
Source: DRHP
Let’s touch upon all the above six competitive strengths one by one.
Brand-building capabilities and repeatable playbooks
They have developed a brand-building playbook that enables them to replicate their success with Mamaearth across newer brands. These playbooks extend from their innovation engine to their distribution strategy to their marketing and customer engagement capabilities. Leveraging these playbooks, they have demonstrated a track record of introducing new brands to the market.
Two things stand out for them as per their claims in the DRHP:
● Ability to acquire new customers and increase share of wallet from existing customers
● Ability to launch new brands at low costs
Consumer-centric product innovation
Product innovation is a key strength of their business. They primarily do it through these key innovation tools:
● Social Listening
● Online Competitive Intelligence
● User Conversational Research
This consumer-insights informed product development has helped them focus on new and emerging trends before they become mainstream opportunities and in turn, has translated into share gain in key categories and need spaces.
Digital-first omnichannel distribution
Their omnichannel network allows them to be present across various touchpoints and serve their consumers wherever they shop. Their distribution model is led by their digital presence (DTC and e-commerce marketplaces).
More than 60% of revenue was derived from DTC and e-commerce marketplaces in FY23 and the first 3 months of FY24.
Data-driven contextualized marketing
They have adopted a marketing model through which they activate consumer engagement initiatives across multiple media platforms and channels. With a combination of digital and traditional marketing, they deliver a consistent narrative about their brands and their proposition across all touch points relevant for our consumers. Through these initiatives, they aim to target consumers across the entire marketing funnel from creating awareness to driving consideration and conversion for their brands.
In this initiative these 4Cs are the cornerstone of their strategy:
Content
Communicate
Community
Commerce
Robust Growth
As per an independent agency report, Mamaeart is the largest digital-first BPC company in India in terms of revenue. They have grown their revenue at a CAGR of 80.14% between FY21 and FY23 (from ₹459Cr to ₹1493Cr in FY23), while the median revenue CAGR of all other BPC companies for which data was available for the relevant period was 28.00%.
Growth in number of units delivered across all brands.
FY22: 143%
FY23: 68%
Q1FY24: 44%
Founder-led company with a strong professional management
Before founding Mamaearth, Varun worked across marquee companies in India such as Hindustan Unilever Limited, Diageo India Private Limited and Coca-Cola India Private Limited. Ghazal worked with NIIT and operated https://t.co/Bwc7aT6PdP, an independent commercial operation. Ghazal has been associated as a promoter and director since September 16, 2016. Together, their knowledge and understanding of the consumer packaged goods and BPC products space in India have been instrumental in developing and growing the business.
The founders are complemented by a professional leadership team with a combined experience of over 100 years across consumer packaged goods, e-commerce, and DTC companies in India.
Business Strategy
The business strategy is fairly simple and clear. The proof of the pudding, though, lies in the execution and the consistency in the coming years.
Their three-pronged strategy is as follows:
Expand distribution and brand awareness: Continuing brand awareness & expanding offline footprint in general and modern trade retail channels to reach a larger customer base
Incubate or acquire new engines of growth: Launch new brands and continue to drive product innovations across existing brands, develop new channels and strengthen our omni-channel strategy, & selectively expand into new markets.
Strengthen business efficiency drivers: Optimize channel mix for the flagship brand, Mamaearth, and drive scale benefits from core businesses.
Industry Tailwinds
The shift to organized channels is a fairly secular trend across most key retail categories, however, it is more pronounced in categories like BPC, Apparel, and Electronics which lend well to brand creation. The products in these categories are differentiated through brands and their design language is pervasive across various facets of the products. These categories already have much higher organized penetration – more than 7-10x the organized penetration of grocery as of 2022.
Going forward, these categories are likely to become overwhelmingly organized – more than half of the BPC market and more than 90% of the electronics market.
Source: DRHP
Now that we have a fair idea of the business and industry tailwinds, we can move on to the financials
Financials
Source: Value Research
As you can see while they have been able to increase their revenue at a breathtaking speed, profits have been elusive. It is incredibly difficult for a public market investor to bet on these businesses. Because the path to profitability is an uncertain one for them. Plus, if an economic downturn comes up in the next few years, you can safely assume a high growth business will be affected the most if they do not have the profits and reserves to absorb the high losses. Public market investors often forget that they cannot invest the way private market investors do. Hence, either of the two is very important for you to consider investing in these businesses: attractive starting valuation or sustainable profits growing at a high CAGR. Unfortunately, neither of that is in sight as of now.
Before we delve into the valuation game, let’s also look up some fo the glaring risks in this business.
Risks
Product concentration risks: They derive a significant amount of revenue from a limited number of products. In FY21, FY22, FY23, and Q1FY24 they derived 30.38%, 30.17%, 27.38%, and 29.10% of their revenue, respectively, from the sales of their top 10 products.
Supplier Concentration Risks: They do not manufacture any of their products and rely entirely on third-party manufacturers for the manufacturing of all the products. In FY21, FY22, FY23, and Q1FY24, the top three manufacturers for each year/period contributed to 81.95%, 70.97%, 51.73%, and 46.01% of the total value of our purchase of traded goods, respectively.
Their dependence on third-party manufacturers for the manufacturing of all their products subjects them to risks, which, if realized, could adversely affect their business, results of operations, cash flows, and financial condition.
Disclaimer Opinion in Auditor’s report: The Auditor’s report on internal financial controls issued on their standalone financial statements for FY20 contains a disclaimer of opinion relating to the Auditors’ inability to obtain appropriate audit evidence to provide a basis for an opinion on adequate internal financial controls.
Intense Competition: They face intense competition which may lead to a reduction in their market share, cause them to increase their expenditure on marketing and promotion as well, and cause them to offer discounts, which may result in an adverse effect on their business and a decline in their profitability. According to RedSeer, their market share was 1.5% of the total BPC market for the calendar year 2022. For FY21, FY22, FY23, and Q1FY24, their advertisement expenses constituted 38.68%, 41.49%, 35.52%, and 34.99% of their revenue, respectively.
Valuation
At 7 times TTM sales, Mamaearth trades closer to the multiples of HUL, P&G, and other large consumer brands that have decades of track record of sustainable profitable growth. A company that was started 6 years ago, and grown fanatically based on very high A&P costs and big acquisitions has no clear path to profitability and sustainability as of date.
It’s not a question of whether and when will they achieve profitability.
It’s a question for you, a public market investor, when and why will you invest in it?
Our team works really hard to come up with these differential insights on different businesses.
It will do us a world of good if you can "REPOST" this post. It will help us reach out to more investors who may gain from our work. 🙏
If you wish to receive more long posts like this, do let us know in the comment section with a "YES".
If you find value in our research, do follow us @SmartSyncServ
Thank you for reading🙏
![SmartSyncServ's tweet photo. Mamaearth got listed 10 days ago.
INR 1700 Cr raised. [Fresh Issue: 335 Cr, OFS: 1336 Cr]
5 years ago:
Revenue: 15 Cr. Valuation: 100 Cr
Today:
Revenue: 1500 Cr. Valuation: 10000 Cr
100x in both the metrics. In just 5 years.
Let’s deep dive into the business here.
We will break down this post on Mamaearth [Honasa Consumer Ltd] into the following main categories:
Origins & Founders
Business
Strategy
Financials
Risks
Valuation
Origins & Founders
They say, “Necessity is the mother of invention”. Mamaearth’s co-founders and husband-wife duo Varun and Ghazal Alagh proved this right with their efforts.
Mamaearth was born out of parental stress. When the Alagh couple were grappling with the problem of treating their infant son’s skin condition with products available in the Indian market, they went to the root of the problem.
This is what Ghazal said in an interview about her worries:
“We found there were certain toxins that were banned in countries outside India and were declared to be harmful to baby skin, but were still being widely used here. And that is what led us to think that somebody should do something about it.”
This was in 2016. Now that you have got an idea of the origin story, let’s deep dive into the business.
Business
Mamaearth is the largest digital-first beauty and personal care (“BPC”) company in India. Since its inception, they have developed products that address beauty and personal care problems faced by consumers. Their products are built to service a core customer need for safe-to-use, natural products, and focus on developing toxin-free beauty products made with natural ingredients.
Their ability to identify and cater to emerging trends has enabled them to develop repeatable brand-building playbooks that have helped in scaling our newer brands at a fast pace. These playbooks are powered by their consumer-centric approach across various aspects of their business model, including their innovation engine, digital-first omni-channel distribution, and technology and data-driven marketing and consumer engagement model.
Since launching Mamaearth in 2016, they have added five new brands to the portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s, and have built a ‘House of Brands’ architecture. As of June 30, 2023, their portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments
A glimpse of all the brands below:
Source: DRHP
Now let’s look at the competitive strengths they are banking on.
Competitive Strengths
Source: DRHP
Let’s touch upon all the above six competitive strengths one by one.
Brand-building capabilities and repeatable playbooks
They have developed a brand-building playbook that enables them to replicate their success with Mamaearth across newer brands. These playbooks extend from their innovation engine to their distribution strategy to their marketing and customer engagement capabilities. Leveraging these playbooks, they have demonstrated a track record of introducing new brands to the market.
Two things stand out for them as per their claims in the DRHP:
● Ability to acquire new customers and increase share of wallet from existing customers
● Ability to launch new brands at low costs
Consumer-centric product innovation
Product innovation is a key strength of their business. They primarily do it through these key innovation tools:
● Social Listening
● Online Competitive Intelligence
● User Conversational Research
This consumer-insights informed product development has helped them focus on new and emerging trends before they become mainstream opportunities and in turn, has translated into share gain in key categories and need spaces.
Digital-first omnichannel distribution
Their omnichannel network allows them to be present across various touchpoints and serve their consumers wherever they shop. Their distribution model is led by their digital presence (DTC and e-commerce marketplaces).
More than 60% of revenue was derived from DTC and e-commerce marketplaces in FY23 and the first 3 months of FY24.
Data-driven contextualized marketing
They have adopted a marketing model through which they activate consumer engagement initiatives across multiple media platforms and channels. With a combination of digital and traditional marketing, they deliver a consistent narrative about their brands and their proposition across all touch points relevant for our consumers. Through these initiatives, they aim to target consumers across the entire marketing funnel from creating awareness to driving consideration and conversion for their brands.
In this initiative these 4Cs are the cornerstone of their strategy:
Content
Communicate
Community
Commerce
Robust Growth
As per an independent agency report, Mamaeart is the largest digital-first BPC company in India in terms of revenue. They have grown their revenue at a CAGR of 80.14% between FY21 and FY23 (from ₹459Cr to ₹1493Cr in FY23), while the median revenue CAGR of all other BPC companies for which data was available for the relevant period was 28.00%.
Growth in number of units delivered across all brands.
FY22: 143%
FY23: 68%
Q1FY24: 44%
Founder-led company with a strong professional management
Before founding Mamaearth, Varun worked across marquee companies in India such as Hindustan Unilever Limited, Diageo India Private Limited and Coca-Cola India Private Limited. Ghazal worked with NIIT and operated https://t.co/Bwc7aT6PdP, an independent commercial operation. Ghazal has been associated as a promoter and director since September 16, 2016. Together, their knowledge and understanding of the consumer packaged goods and BPC products space in India have been instrumental in developing and growing the business.
The founders are complemented by a professional leadership team with a combined experience of over 100 years across consumer packaged goods, e-commerce, and DTC companies in India.
Business Strategy
The business strategy is fairly simple and clear. The proof of the pudding, though, lies in the execution and the consistency in the coming years.
Their three-pronged strategy is as follows:
Expand distribution and brand awareness: Continuing brand awareness & expanding offline footprint in general and modern trade retail channels to reach a larger customer base
Incubate or acquire new engines of growth: Launch new brands and continue to drive product innovations across existing brands, develop new channels and strengthen our omni-channel strategy, & selectively expand into new markets.
Strengthen business efficiency drivers: Optimize channel mix for the flagship brand, Mamaearth, and drive scale benefits from core businesses.
Industry Tailwinds
The shift to organized channels is a fairly secular trend across most key retail categories, however, it is more pronounced in categories like BPC, Apparel, and Electronics which lend well to brand creation. The products in these categories are differentiated through brands and their design language is pervasive across various facets of the products. These categories already have much higher organized penetration – more than 7-10x the organized penetration of grocery as of 2022.
Going forward, these categories are likely to become overwhelmingly organized – more than half of the BPC market and more than 90% of the electronics market.
Source: DRHP
Now that we have a fair idea of the business and industry tailwinds, we can move on to the financials
Financials
Source: Value Research
As you can see while they have been able to increase their revenue at a breathtaking speed, profits have been elusive. It is incredibly difficult for a public market investor to bet on these businesses. Because the path to profitability is an uncertain one for them. Plus, if an economic downturn comes up in the next few years, you can safely assume a high growth business will be affected the most if they do not have the profits and reserves to absorb the high losses. Public market investors often forget that they cannot invest the way private market investors do. Hence, either of the two is very important for you to consider investing in these businesses: attractive starting valuation or sustainable profits growing at a high CAGR. Unfortunately, neither of that is in sight as of now.
Before we delve into the valuation game, let’s also look up some fo the glaring risks in this business.
Risks
Product concentration risks: They derive a significant amount of revenue from a limited number of products. In FY21, FY22, FY23, and Q1FY24 they derived 30.38%, 30.17%, 27.38%, and 29.10% of their revenue, respectively, from the sales of their top 10 products.
Supplier Concentration Risks: They do not manufacture any of their products and rely entirely on third-party manufacturers for the manufacturing of all the products. In FY21, FY22, FY23, and Q1FY24, the top three manufacturers for each year/period contributed to 81.95%, 70.97%, 51.73%, and 46.01% of the total value of our purchase of traded goods, respectively.
Their dependence on third-party manufacturers for the manufacturing of all their products subjects them to risks, which, if realized, could adversely affect their business, results of operations, cash flows, and financial condition.
Disclaimer Opinion in Auditor’s report: The Auditor’s report on internal financial controls issued on their standalone financial statements for FY20 contains a disclaimer of opinion relating to the Auditors’ inability to obtain appropriate audit evidence to provide a basis for an opinion on adequate internal financial controls.
Intense Competition: They face intense competition which may lead to a reduction in their market share, cause them to increase their expenditure on marketing and promotion as well, and cause them to offer discounts, which may result in an adverse effect on their business and a decline in their profitability. According to RedSeer, their market share was 1.5% of the total BPC market for the calendar year 2022. For FY21, FY22, FY23, and Q1FY24, their advertisement expenses constituted 38.68%, 41.49%, 35.52%, and 34.99% of their revenue, respectively.
Valuation
At 7 times TTM sales, Mamaearth trades closer to the multiples of HUL, P&G, and other large consumer brands that have decades of track record of sustainable profitable growth. A company that was started 6 years ago, and grown fanatically based on very high A&P costs and big acquisitions has no clear path to profitability and sustainability as of date.
It’s not a question of whether and when will they achieve profitability.
It’s a question for you, a public market investor, when and why will you invest in it?
Our team works really hard to come up with these differential insights on different businesses.
It will do us a world of good if you can "REPOST" this post. It will help us reach out to more investors who may gain from our work. 🙏
If you wish to receive more long posts like this, do let us know in the comment section with a "YES".
If you find value in our research, do follow us @SmartSyncServ
Thank you for reading🙏](https://pbs.twimg.com/media/F_HSjWFXAAADN7f.png)
Bro advice: Runway when someone claims that their strategy is a holy grail.
Nothing is fool proof in the markets.
@paaaaavann Congratulations 🥳
The Nifty Index has moved up by 71% since Chandrayaan-2 in 2019.
Plenty to celebrate and plenty more to grow🤙
#nifty50
Never bet against India! 🇮🇳
This is the chant we are hearing all the way from stock market to the moon. 🕒🚀
#Chandrayaan3 #stockmarket #Trader
Came across this quote over the weekend and found it super apt to the times we live in.
Personally I have applied it to finding trade strategies, building wealth and almost everything else in general.
Simplicity >>>
@jaggu_100 Congratulations 🎉
💯💯💯
Most of the successful traders I know lean towards the cautious, humble,fearful & anxious side.
They are even constantly faced by self doubt.
So if I see a trader who's cocky, arrogant & behaves knows-it-all, instant red flag!
Either he's new/trades 1 lot/scams for a living.
All three are the same.
Everyone is reaching/projected to reach the same outcome at the end of 5 years.
Who is the better investor?
Why?
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