We are in absolute compliance, legal matters will get resolved very soon: Good Glamm Group’s Darpan Sanghvi

Darpan Sanghvi, Group founder and CEO, The Good Glamm Group

It's been a rough ride for The Good Glamm Group in the last two months. From the highs of expanding to the US market in a joint venture with tennis legend Serena Williams and raising the first tranche of a $70-million fund raise to the lows of getting slapped by a legal notice alleging financial mismanagement and delaying pay outs by Indian Angel Network (IAN), an investor in its portfolio brand Sirona.

The content to commerce unicorn, backed by Warburg Pincus, Prosus Ventures, Accel, Bessemer Ventures Partners, Trifecta Capital among others, has around 12 brands including make-up, personal care and media brands categorised under four verticals:  The Good Brand Co, The Good Media Co, The Good Creator Co and The Good Community.

Group founder and CEO Darpan Sanghvi has been shuttling between his home base in Mumbai and Delhi every week, where he has set up a larger office for most of the employees across the acquired brands.

Sanghvi caught up with Moneycontrol on one such short weekend trip to Mumbai, opening up about the legal notices, IPO plans for 2025, turning profitable, top level restructuring, global expansion strategy and more.

Edited excerpts:

The Good Glamm Group got a legal notice from IAN recently alleging delay in payments to portfolio companies Sirona and Organic Harvest. It’s been two weeks, how’s is the company responding to it? What are the next steps?

We are in absolute compliance with all our contractual obligations. We are very confident these matters will get resolved very soon. It's unfortunate, what has come up and the way it has come out. We are on it.

Sources said that the Good Glamm Group lacked funds to pay out portfolio startups Sirona and Organic Harvest, which led to renegotiation of terms to delay payments to buy more time for a fundraise. How do you assess this?

There's been no delay on our end. We are doing everything that is contractually correct. We are in compliance with the contractual obligations. And as per those contractual obligations, our timelines are all right. From a Good Glamm standpoint, it's very straightforward. We have always made all our payments on time. We have always acquired all the shares that we had to acquire. There are a couple of cases where there are some disagreements right now, or contractual disagreements, which will resolve soon.

Back in 2023, when we spoke, these startups were supposed to be 100% acquired by 2023 and 2024 end. Where do things stand now?

We are still in the start of 2024, it will get done. And unfortunately, some people have tried to play this in a very different way. We are absolutely on track. We did what we had to do last year. We're doing what we're doing this year, and we'll be done with it by end of this year. I'm still seeing the same thing.

This was happening in tranches. We did a tranche last year, and we are going to finish this up by end of this year.

Also read: Organic Harvest and Sirona founders to exit The Good Glamm Group by next year

As per the last available financials from FY22, your losses went up 6X YoY to over Rs 289 crore and the company was hugely cash flow negative. How do you plan to take the company for an IPO in less than one and a half year? What’s the strategy there?

This was in comparison to our revenue growth. Revenue went up from Rs 49 crore in FY21 to Rs 240 crore in FY22, losses went up in accordance to that. The strategy now is to become profitable because we have cracked growth. My FY23 revenue is about Rs 640 crore (audited), which is a crazy jump if you think FY21 and FY23, that makes us the fastest growing consumer company in India…So our target by the time we get to the IPO in 18 months, will be about Rs 1,500 crores revenue. From FY21 to FY25, this is going to be a CAGR of over 100%. No consumer company going on the stock market in India is growing at a CAGR for the last four years of over 100%.

Now what we have to solve for is profitability. So we should be breaking even in the next two quarters, at a group level.  We want to end this quarter with Good Media and Good Creator Co breaking even… The creator arm is powering our one-and-a-half million orders a month on your website for commerce.

What’s driving these revenue growth estimates?

By the time we hit the IPO, our international business is going to be about 30-35% of our revenues. So India business will scale to about Rs 1,000 crore plus for us and the international business will get us Rs 400-500 crore. And that's how we will get to the Rs 1,500-crore mark in the next year and a half.

I think growth is very well taken care of, profitability was key to this journey to IPO. If I see the last few months, we completed a fundraise first, then we launched in the US successfully, then we completed the restructuring of the India business to allow us to get to break even. So we did the reduction that we had to do in fixed costs. Last year, we did the reductions in discounts and marketing. So, in FY24, I became CMP (contribution margin positive) profitable. In FY25, we will be EBITDA profitable. And that's sort of the journey for us.

In between all of that, we continue to launch new exciting products and brands as we did with Karan Johar’s Pout in December.

Which are the top three selling brands from your portfolio?

So MyGlamm is number one. And then I would say the other four brands, which are Moms Co, Sirona, Organic Harvest, and St. Botanica are all fairly close to each other. MyGlamm is 40% of our revenue. And then the other four brands will be approximately 15% of revenue for us, so it's fairly evenly spread out.

Tell us a more about your global expansion strategy. You have already invested about Rs 250 crores for Wyn and the US expansion. What’s next? Have you earmarked more funds for the same?

There are no further funds required for international expansion. We finished all our international investments last year actually. Because we've been working on it for the last couple of years. Now, in international our strategy is to be the first global beauty company to come out of India. As of today we are the only Indian company to have a mainstream US brand, with Wyn Beauty. We've already taken that bet and that has started to work out very well for us. The next step is that distribution is getting bigger. So, my target by end of this year is to take my Indian brands to America.

The thought process is very simple -- to have one distribution platform and cost base globally. We can keep adding more brands to the same distribution channel. So for example, I can bring my US brands to India, I can take my Indian brands to the US. We have already started selling in the Middle East.

We have launched Wyn in nearly 700 offline stores of Ulta in the US, now our Indian brands will go there too. In the US and developed markets, even in the Middle East, there are organized retailers. Once you are able to get into two or three big retailers, you have the market access. That’s very hard to get into.

How do you build a brand out of some of these portfolio companies, because they are not exactly category leading brands?

Some of them are. But some are not because some of the categories are very large. We are building brand in two-three ways. First, is strong awareness and reach…Through our content creator channels, we get about 300 million impressions every month for our brands, on social media. Then the next step after that is we want customers to try. That's where DTC (direct to customer) comes in, and we are able to acquire five lakh new customers.

We are also doing influencer marketing to serve our community aspirations. So for example, in the Moms school, we created the Mompreneur Program, which is India's largest platform for mothers to become entrepreneurs. We got 15,000 mothers participating in the programme.

According to media reports your last fund raise happened at around $30-40 million, which is a part of the larger $70 million round. The first tranche happened at a flat valuation of $1.2 billion. Do you expect a down round going forward as most unicorns recently have been struggling to maintain pre-funding winter valuations?

We just sustained it. A majority of the round has already happened at a flat valuation. We're one of the few who have been able to maintain the valuation. Yeah, we've already done it. People had raised this question last year as well.

How will the fresh funds be used to aid the IPO plans? Which areas do we expect a ramp up in the business?

The capital that we have raised, is basically get us to profitability and all the way to the IPO next year. This will be invested as working capital, for our marketing, brands, brand building and things like that. So basically this is for our regular operations. There is no further planning any M&A. There’s no money going outside for international investments. All of that we have already been completed. This capital is just to ensure that we have adequate capital till we get to the end.

Can you share some numbers around how the content to commerce play is playing out? How are the acquired brands performing across the board?

Our content creator business is breaking even this quarter, end of June. This content creator business is giving 300 million impressions every month to our commerce business. From that 300 million impressions, I am getting 1.5 million orders every month, which is making our DTC business profitable.

How’s your offline presence expanding? What’s the revenue share from offline?

The DTC piece is valuable here. Offline for us, will always be a small channel, like 20 percent of our revenue, unlike others, where offline is 60-80 percent of their revenue. We will be digital first.

Our offline presence is through modern trade. So we sell our make-up at retailers like Shoppers Stop. Then we sell at Reliance, Walmart and the others for our personal care. We also sell at general trade businesses. But our offline put together is only 20 percent of our revenue. Rest 80 percent of our revenue is digital.

The Good Glamm Group also restructured its leadership team recently. CEO Sukhleen Aneja is leaving, there’s a new CFO. Will there be more exits? Will all the portfolio startup founders continue?

Portfolio startup founders have been exiting according to their contractual timelines for the past two years. In fact, your article published last year stated that Moms Co. founders have exited, Sirona is exiting, and Organic Harvest will exit after a year. So, those timelines continue to hold.

The overall restructuring was towards the goal of getting to profitability. And it was a restructuring to bring an agile operational framework, whereby we have reduced hierarchies; so that decision making is much faster and we have empowered managers with controlled budgets to make decisions not waiting for layer two, layer three for permissions to create a very nimble working environment. It’s always tough, restructurings are the hardest. I think we've got some great team members here who are supercharged, all wanting to ring the bell at the IPO and running to get there. So yes, the restructuring is done.

We've broken the silos, we have merged them. For example, earlier there was a creative team for brands and a separate creative team for Good Media. Now we have combined it to one creative team for the entire group. That has gotten a lot of efficiency.  So we have actually collapsed departments and reduced hierarchies to achieve what are calling agile operational team.