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Initial public offerings from Indian startups have remained largely in the deep freeze for the past 12 months. A Sequoia Capital-backed beauty and personal-care-products startup is now hoping to break the curse. But success might have to come at the cost of a big compromise on valuation.

At the tail end of 2022, the parent of Indian personal-care-products startup Mamaearth – Honasa Consumer Ltd—filed for an initial public offering. The company plans to issue new shares worth 4 billion Indian rupees ($49 million) and sell 46.8 million existing shares. Investors including Sofina, Stellaris Venture Partners and Fireside Ventures would sell part of their stakes while Sequoia would stay put. Mamaearth started as a direct-to-consumer brand online but has now established a substantial footprint offline too—an inevitable choice as growth in online shopping slows postpandemic.

The IPO is nonetheless going to be a heavy lift. Tech listings and late-stage funding in private markets are both flagging. Many top Indian internet companies that listed in the last 18-24 months are trading below their listing price. And funding for late-stage startups in 2022 was nearly half what it was in 2021, according to Tracxn Technologies. Honasa’s draft prospectus doesn’t mention a specific valuation sought. But last year Reuters reported that it could seek around $3 billion—implying a price to sales multiple of around 25 for the year ending in March 2022. Honasa’s older, more traditional peers such as Hindustan Unilever and Colgate Palmolive are trading at 10.70 and 7.84 times sales respectively, according to FactSet. Chief Executive Officer Varun Alagh declined to comment on the company’s IPO plans.

Honasa is clearly hoping for further rapid growth, but it might need to seek a lower valuation if it wants to leave some room on the table for investors to make money—at least in the near term.The company was valued at $1.2 billion in its latest funding round last January, according to Traxcn. And a lot has changed since then in global markets—investors might not be in the mood to splurge on a company that is still very focused on growth and barely turns a profit. Honasa made a profit of 37.62 million Indian rupees on revenue of 7.32 billion Indian rupees for the six months ending in September 2022.

The company is spending heavily on advertising to create brands apart from Mamaearth, and expand its online and offline presence. Advertisement expenses were equal to 37.63% of its total revenue from operations for the six months ending in September 2022. Of the $49 million of fresh proceeds, it plans to spend a little less than half on of its advertising expenses.

Still, the potential for growth is there for those willing to stick around: According to a Redseer estimate commissioned by Honasa and included in the draft prospectus, the company’s addressable market could hit $45 billion-$50 billion by 2026.

For a new company, Honasa is now firmly in the spotlight. If it fails to excite investors, other startups might have to further delay their listing plans. But if it succeeds, the IPO market might thaw a little, giving hope to many late-stage startups running out of cash to fuel their high-speed growth.

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