MUMBAI: Sugar Cosmetics, once among India’s fastest-growing beauty startups, is seeking a sharply discounted funding round after an aggressive offline expansion and slowing sales growth strained its finances, according to four people familiar with the matter.
The Mumbai-based beauty brand has begun a process to raise ₹100-150 crore after grappling with a severe cash crunch over the past six months amid declining revenue, a shrinking offline footprint and rising employee attrition, the people said.
The fresh fundraise is likely to happen at a valuation of ₹1,400-1,500 crore, sharply lower from its peak valuation of about ₹3,000 crore in 2022, two of the people said. While typical growth investors are unlikely to invest in the current state, the company will tap family offices and high net-worth individuals (HNIs) alongside some existing investors to facilitate the capital raise even as its revenue declined further to about ₹380 crore in FY26, the person added.
The need for fresh capital has intensified as the company struggles to manage working capital and employee payouts. “Some of the salaries for employees over the last month have been settled from the promoter’s personal capacity,” another person said, adding that any further strain in its working capital could affect the company’s ability to deliver orders.
Mint could not ascertain whether the company had undertaken layoffs. Sugar Cosmetics did not respond to Mint’s request for comment till press time.
“The company has been trying to do a sizeable fundraise for over two years now. The persistent delays stem from declining revenue coupled with investors increasingly prioritizing profitable growth and other segments like AI and quick commerce that are competing for share of capital,” a third person said.
This development comes less than a year after the company raised $5 million in a mix of debt and equity from Anicut Capital alongside Stride Ventures and L Catterton. It also counts other investors including Elevation Capital, A91 Partners, India Quotient, and Malabar Investments.
For context, Vellvette Lifestyle Pvt. Ltd, which operates the Sugar Cosmetics brand, reported nearly a 4x jump in revenue between FY21 and FY24 to about ₹504 crore. In the following year, its revenue slumped to ₹397.7 crore. Its losses also widened to ₹133.7 crore in FY25 from ₹67 crore a year earlier, according to filings accessed by Tofler from the Ministry of Corporate Affairs.
Expansion misfire
“Sugar made the mistake of aggressively expanding beyond the metro and tier-1 markets…Some touchpoints worked while others didn’t, but their target market became severely diluted in the process, as it required a more rigorous examination of consumer behaviour and pricing beyond the metros,” a fourth person said.
“Over the last year, the company has corrected some of these moves with its offline footprint (GT/MT), which has nearly halved in count. It has shut down some stores and let go of some distributors that proved too expensive to sustain,” this person explained, saying that this has led to a significant improvement in its bottom line by about ₹90-95 crore.
All the people spoke on the condition of anonymity.
As the company battles challenges in retaining customers, Sugar Cosmetics is charting a turnaround plan by identifying high-growth areas where its SKUs have sold well, two of the people said.
The company is razor-focused on becoming profitable and regaining its revenue share before reattempting any expansion plans, the first person said.
“Once the funds are raised, the proceeds will be used to double down on a narrower portfolio (instead of expanding further) within these geographies and maintain more rigorous pricing discipline to improve its financials,” the second person elaborated.
Competitive pressures
Founded in 2012 by IIM Ahmedabad alumni and husband-and-wife duo Vineeta Singh and Kaushik Mukherjee, Sugar sells cruelty-free beauty products such as foundations, highlighters, concealers and lipsticks. It had about 45,000 retail outlets across 550 towns and cities and more than 200 brand-owned stores across the country as of 2023.
The company competes with brands like Purplle, Renee Cosmetics, Plum and listed firms Nykaa and Mamaearth across various categories, as per online reports. Players like Purplle and Renee have seen a significant boost to their revenue in recent years.
While Purplle nearly doubled its revenue to ₹1,367 crore in FY25 and expects a further increase in the following year, Renee saw its revenue grow from ₹328.6 crore to nearly ₹440 crore in FY26. Sugar also counts mass-market brands such as Lakmé, Maybelline, L'Oréal and Lotus Herbals among its peers.
While new-age brands are finding pathways to scale, a recent report by consultancy firm Redseer highlighted that successful execution requires understanding the factors driving various market shifts, emerging consumer expectations, growth-ready categories and creating profit pools.
Redseer estimates that India will be the fourth-largest beauty and personal care market globally, growing to $40 billion by 2030, despite unorganized supply chains, margin leakages, low profitability and consumer perception barriers.