MamaEarth's IPO

Five Concerns About Mamaearth's IPO

We've all witnessed the criticism that Mamaearth is receiving, and with good reason, but allow me to summarize the reasons why investors should be wary of this specific IPO:

1.The income and earnings for Mamaearth for the last three years;

FY 21: -?1,324 Cr, ?460 Cr in Loss??

FY 22: ?943 Cr, ?22 Cr in profit

FY23: ?1492 Cr, -?141 Cr in Loss

Apart from the evident discrepancy between earnings and losses, the loss figure appears to be quite high.

2. It's impossible to determine the PE of a business that is losing money. Let's just accept their word for it and accept their ?100 Cr predicted profit for FY24.

Estimated profit for FY24: ?100 Cr

Appraised at ?10,500 Cr

PE Ratio: 105 / 10,500 Cr = 100 Cr

I don’t think I have to explain this that why 105 PE is ridiculous.

3.Mamaearth spends ?40 on advertisements and marketing for every ?100 it makes. This indicates that the company has an ad-to-sales ratio of over 40%.Given that the likelihood of a consumer leaving Mamaearth after purchasing a product is rather high, it is only reasonable to conclude that the company doesn't have many repeat customers.

4.Mamaearth advertises "toxin-free" products, but they don't actually own any patents for the goods they sell, which is why they don't even have a manufacturing facility. They admitted as much in the DHRP, saying, "We outsource the manufacturing of all our products to third-party manufacturers."

Furthermore, these producers operate under a non-executive arrangement, which implies they produce goods for clients in addition to Mamaearth. As a result, anyone may launch Papaearth with the same product line, and as Mamaearth lacks patents, they are powerless to stop it

5. Mamaearth is raising ?1,701 Cr, of which 78%, or ?1,336 Cr, is offered for sale. This indicates that the company's promoters and initial investors—including Shilpa Shetty and Kunal Bahl—are selling their shares to the public in order to book gains and exit their holdings.

What is your view of Mamaearth products? Do you intend to apply for the IPO?

P.S: News says “Ashneer Grover also gonna apply for IPO”…

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