Mamaearth in talks with Fidelity, GIC, QIA, SoftBank for $150 million pre-IPO round

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Direct-to-consumer (D2C) unicorn Mamaearth is looking to raise about $120-150 million in a new funding round ahead of its planned initial public offering (IPO), according to sources. This comes as some of the company's early investors are looking to cash out in this round.

Mamaearth, operated by Honasa Consumer Private Limited, has held preliminary discussions with investors such as SoftBank, sovereign wealth funds like Singapore's GIC and Qatar Investment Authority (QIA), and pre-IPO investors like Fidelity Investments, people aware of the matter told Moneycontrol. The talks are to raise money at a valuation of $1.5 billion. The round will mostly be a secondary share sale, as Mamaearth, a profitable company, does not need a primary capital infusion at this time, one of the persons cited above said.

Even though founders Varun and Ghazal Alagh are confident of delivering an exit to investors via their upcoming public listing, a few early investors want to offload shares before the IPO, according to a source.

Stellaris Venture Partners, Fireside Ventures, Shilpa Shetty Kundra, former BharatPe executive Suhail Sameer, and Snapdeal's Kunal Bahl and Rohit Bansal are among Mamaearth's early investors, according to Tracxn, a private markets data provider. However, it is important to note that the talks are still in the early stages.

Mamaearth declined to comment on queries from Moneycontrol. Questions sent to SoftBank, Fidelity, GIC, and QIA remained unanswered.

If the deal goes through and SoftBank comes on board, it will be its first investment in India in over 15 months. It will also be a rare pre-IPO deal for SoftBank in India, as the company typically invests at growth and late stages.

“SoftBank has been largely looking at follow-on rounds. Mamaearth is profitable and with broader markets looking up, its IPO could sail through which makes it a good fit for SoftBank”, a second person quoted above told Moneycontrol.

If Mamaearth's funding round closes, it will be a boost for the IPO-bound direct-to-consumer (D2C) startup. Mamaearth could potentially become the first venture capital-funded unicorn to be listed on India's stock exchanges this year. Five Star Business Finance, a startup backed by Peak XV Partners, was the last venture capital-backed unicorn to go public last year.

Earlier this month, Mamaearth received the nod from markets regulator Securities and Exchange Board of India (Sebi), paving the way for its IPO. Sources say the company is preparing to kick off investor roadshows for its IPO in the coming weeks.

Mamaearth had filed draft papers with Sebi in December last year comprising a fresh issuance of shares worth Rs 400 crore and an offer for sale (OFS) of Rs 4.68 crore shares by promoters and investors.

The shareholders who will dilute their holdings via the IPO include the founders Varun and Ghazal Alagh, Sofina Ventures SA, Evolvence, Fireside Ventures, Stellaris Venture Partners, Snapdeal founder Kunal Bahl, Bollywood actress Shilpa Shetty Kundra, Rishabh Harsh Mariwala, and Rohit Kumar Bansal. As reported earlier, Peak XV Partners is unlikely to participate in the OFS.

Founded in 2016, by the husband-wife duo Varun and Ghazal Alagh (of 'Shark Tank' fame), Mamaearth turned unicorn (a startup valued at over $1 billion) in 2021 when it raised $52 million in a round led by Peak XV Partners. In FY22, the company posted a net profit of around Rs 20 crore while its revenues also surged by 102 percent to Rs 952 crore in the fiscal compared to the year-ago period.