The success of Nykaa, Mamaearth and FirstCry in the stock market has made new-age consumer brands more optimistic about an initial public offering (IPO).
Around 5-8 direct-to-consumer (D2C) and e-commerce startups are expected to list by the end of FY25, based on market trends, regulatory environment and individual company readiness.
Those that have either filed the draft red herring prospectus (DRHP) or are considering public listings soon include boAt, Zappfresh, The Good Glamm Group, Lenskart, BlueStone, SUGAR Cosmetics, Wow Skin Science, Purplle, Bira 91, Infra.Market, Flipkart and Zepto.
S Kannan, partner and co-founder, Fireside Ventures, told FE that the success of many brands has encouraged other consumer companies to go public. “They have a sharper insights into how the market views new-age companies. They understand the market is willing to value future performance if the management wins the market’s confidence through delivering on its plans,” he said.
Fireside was an early investor in Mamaearth and earned a 4,500% profit by selling its stake in its parent company, Honasa Consumer.
Sridhar Ramachandran, advisory board member, MentorMyBoard, said he expects more consumer brands to list this year unless there is some market disequilibrium. “The monsoon is good, oil prices are down, infrastructure spend is high and so on. All these factors would help in market sentiment,” he said.
The trend of consumer brand listings is likely to continue in the coming years, but with some evolution such as sector diversification. “Beyond personal care and fashion, we may see consumer tech brands in areas like edtech, healthtech, or fintech considering public listings,” Rajnickant Patel, advisory board member, MentorMyBoard, said. He added that brands with a strong presence in tier 2 and 3 cities and a strong focus on environmental, social and governance (ESG) credentials might also emerge as attractive IPO candidates.
However, while the sentiments are positive, a lot also depends on the companies’ financial and market performance, point out analysts. As the market becomes more crowded, differentiation and sustaining a strong unit economics will become increasingly crucial for long-term success.
Some analysts also feel that an IPO may not be the right way forward for all, but the current IPO success of some companies will help startups in the space raise money at good valuations. Additionally, it will also pave the way for acquisitions, similar to Set Wet or Beardo or True Elements being acquired by Marico, or Soulfull and Capital Food being acquired by Tata Consumer.
“Each of these brands were successful in their respective categories but still chose to be part of a larger consumer company. I believe that this trend will pick up for many more brands, especially those that are finding it challenging to move from online to offline,” Santosh Sreedhar, partner, consumer and retail, Avalon Consulting, said.
Follow us on Twitter, Instagram, LinkedIn, Facebook
