Last month, direct-to-consumer brand MyGlamm set up The Good Glamm Group, consolidating all its businesses — MyGlamm, POPxo and BabyChakra — under one umbrella and aspiring to buy more beauty brands with a budget of Rs 2,000 crore.
It just announced its first acquisition of a D2C brand Moms Co and targets to do five more acquisitions before the year ends.
Will it be fair to call it a Thrasio of the consumer brands? Speaking to Moneycontrol, Darpan Sanghvi, Group Founder and CEO of The Good Glamm Group, speaks on the group's acquisition plans, Indian beauty products market and more.
Edited excerpts:
Q. What was the rationale behind setting up Good Glamm? Are you aspiring to be the Thrasio of the consumer products in India?
No, it is very different.
We have created a content to commerce ecosystem where we have proprietary content assets like PopXo, influencer content assets like Plixxo, baby content assets like BabyChakra with which we have 100 million users. Then we connect with those users digitally and then we are educating them about unique products and brands that we own. We are focused on the beauty and personal care category.
We are building an FMCG conglomerate of the future leveraging content to commerce. We are not looking to buy 30 companies. Our business is about brands.
MyGlamm is a brand in cosmetics. But if MyGlamm wants to sell hygiene or hair oil or baby products, then MyGlamm is not the right brand for it. This is why we are acquiring brands in those categories where there is great proof of concept and we will then scale it up.
Q. You have spoken about an overall budget of Rs 750 crore. The Moms Co. acquisition alone is pegged at Rs 500 crore.
So Rs 750 crore is the cash that we are investing. If you look at our model, it is 40 percent cash, 20-30 percent equity and another 20-30 percent earn-out which will be paid out over the next two years. When you look at this model, it means Rs 750 crore of cash will equate to about Rs 2,000 crore of deal. We are looking to acquire 4-6 brands for around Rs 2,000 crore deal value.
Q. How big is the market for beauty products in India and how many companies do you think can co-exist?
The beauty and personal care market is around $18 billion and it will be $30 billion in the next 5 years or so. This is a brand market which means it is not a winner-takes-all market. There are lots of opportunities for newer brands to come in because India has not seen new brands scale up. It is only the old brands and clearly the opportunity is there today for newer brands.
Q. By when do we see more deals finalising?
We expect to close 4-6 acquisitions we want to do over the next 90 days. They should all be done before December 2021.
Q. Have you finalised the companies? Term sheets signed?
Not really, we move very quickly. So our typical lead time from term sheet to closing is three weeks.
Q. How much revenue should these companies be generating?
Between Rs 50 and Rs 200 crore.
Q. One of the companies that have made a mark for itself in the beauty and personal care space is Nykaa which is now headed for an IPO. What is your take on that?
I am a great admirer of Nykaa. I believe today D2C beauty brands like us are growing and have this amazing opportunity because of all the hard work that Nykaa did over the last 5-7 years ensuring that consumers buy beauty online.
We think that Nykaa's IPO will be a blockbuster. I will personally be buying shares of Nykaa. I hope I get some allocation because it is a wonderful business that they have built out. Nykaa is a channel for brands like us. The bigger Nykaa becomes the bigger is the opportunity for brands like us.
Q. Acquisitions are seldom successful. Companies bring entrepreneurs on board with different wavelengths. Often there are reports of cultural mismatches. What is Good Glamm's strategy to ensure that the acquisition it is making turn out to be successful?
Acquisitions and integrations are nothing but people. It is strategy meeting emotions -- not easy. I am super cognizant of that. I do a lot of things to make sure that the process is smooth. Even before we find the deal, we actually sit together, figure out each one's expectations, want to make sure that everyone is aligned. We make sure that the financial incentivization is correct where we are all working towards a common goal and there is no disconnect over there. We never ever cut the team. The team is always taken care of. The funders are super important for us. We don't do deals if the founders are not staying with us at least for a couple of years to scale up the brand. The answer to your question is that, this is the biggest challenge that I personally work on.
Q. So all of these acquisitions will be acqui-hires?
All of them (employees) are hired. In fact we give them ESOPs as well in the parent company.
Each founder runs his own company. They take whatever they need from the central group. So if they need content engine, technology, offline distribution, we give them. But each of these companies is run independently by the founder. They typically exit over the next 2-3 years and as they prepare to exit which is the final year of exit is when we start the integration process.
Q. You are targeting an IPO by 2023. How much do you plan to raise? What is the valuation you are targeting?
$10 billion listing is what I am dreaming of. To achieve that listing I need to do at least Rs 3,000 crore of revenue and Rs 500-600 crore of EBIDTA. If I hit this mark I do not see any reason when we are growing at 50 percent year on year we can't get to a decacorn IPO. But all of this is what we are working towards. Let's see where we land.
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