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Direct to consumer (D2C) skincare and beauty brand Mamaearth is in talks to raise around $300 million in a planned IPO in the next 12-15 months and is seeking a valuation of around $3 billion, according to a Reuters report.

The Sequoia Capital-backed Indian skincare startup was last valued at $1.2 billion in January 2022 when it raised fresh funds from investors including Sequoia and Belgium's Sofina.

Mamaearth is targetting a valuation of around $3 billion – 10-12 times forward earnings based on sales growth and future revenue potential, the report stated. It plans to file draft regulatory papers by the end of 2022.

The skincare startup is in early-stage discussions to raise nearly $300 million thorugh its initial share sale, with the number pegged at $350 million.

The firm is reportedly in talks with JP Morgan Chase, India's JM Financial and Kotak Mahindra Capital to appoint them as bookrunners to the deal.

Founded in 2016, Mamaearth has become popular in India with its range of "toxin-free" products such as face washes, shampoos and hair oils. It competes with Unilever's India unit, Hindustan Unilever, and Procter & Gamble Co in the booming personal care industry.

Mamaearth's IPO plans come during a broader rout in capital markets and a slowdown in India's booming startup ecosystem that recorded a steller $35 billion in record fundraising last year. Now, some startups are cutting back on staff and finding it difficult to raise funds.

Mamaearth was co-founded by Varun Alagh, a former Hindustan Unilever executive, and his wife Ghazal. With the brand endorsed by popular Bollywood celebrities, the duo has cashed in on growing e-commerce adoption in India by offering its products on platforms such as Amazon and Walmart's Flipkart.

India's beauty and personal care industry is expected to grow to $27.5 billion by 2025, from $17.8 billion in 2020, Indian financial services firm Avendus estimates. The number of online shoppers for beauty products is also projected to rise to 135 million from 25 million during that period, it added.

One equity research analyst, however, said the success of Mamaearth's IPO could hinge on how it plans to rapidly expand into offline sales. Most Indians still go to retail outlets to shop, with e-commerce accounting for just 5-6% of spending.

CEO Alagh had told Business Standard in January that 70% of Mamaearth's sales come from online platforms, but it was targetting a bigger offline presence and aiming to reach 40,000 retail outlets in 100 cities this year.

For the fiscal year ended in March 2022, Mamaearth's parent, Honasa Consumer Pvt Ltd, registered a revenue of $130 million, with a small profit, said one of the three sources.

Despite the Covid-19 pandemic, MamaEarth had grown at a scorching pace in the fiscal year ending March 2021 and also turned profitable. The startup recorded a post-tax profit of 246 million.

Besides India, Mamaearth has set up operations in Nepal, Bangladesh and Sri Lanka and is about to launch in the Middle East region.

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