Ahead of IPO, Mamaearth Amputates Its Costliest Acquisition Momspresso

Ahead of its initial public offering (IPO), Mamaearth seems to have secretly pulled the plug on its first and the most expensive acquisition – Momspresso. 

Inc42 was unable to access Momspresso’s website and app over the last two days. While the website flashed the message “unable to find the server”, ‘Something went wrong’ with its app. 

Interestingly, Mamaearth also seems to have disowned Momspresso completely, as the parent has now dropped its name on the website from the list of brands that it owns.

A questionnaire sent to Mamaearth seeking clarity on the development didn’t elicit any response until the time of publishing this story. 

It must be noted that Inc42 exclusively reported in July this year that Mamaearth was shutting down two verticals of Momspresso – Momspresso MyMoney and its brand marketing vertical. Before shuttering these verticals, the startup sacked 80-100 employees earlier this year.

As per Mamaearth’s red herring prospectus (RHP), the startup’s board, in a meeting in March 2023, decided to “scale down” a majority of Momspresso’s business verticals. 

The RHP stated that the performance and profitability of Momspresso was deteriorating, with the business significantly underperforming (vis-à- vis business plan FY23) during Q4 of FY23. 

“Further the business synergies envisaged from the investment could not be realized despite best efforts of the management. The management also presented multiple scenarios with medium term to long term estimates for the acquired business but none of the scenarios demonstrated considerable improvement in profitability profile and any sight of realizing synergies for the core product business,” the RHP said. 

No Room For Loss-Making Entities?

It seems the decision to dump Momspresso is part of Mamaearth’s strategy to stay away from cash-burning subsidiaries, ahead of its listing on the bourses. 

Barring Momspresso (Just4Kids Services Private Limited) and Honasa Consumer General Trading LLC, Mamaearth’s remaining subsidiaries — BBlunt, B:Blunt Spratt, and Fusion (Dr. Seth’s) — remained profitable in the first quarter of the ongoing financial year.

Interestingly, while Honasa Consumer General Trading LLC reported a small loss of INR 40 Lakh in Q1 FY24, Just4Kids gave a blow of INR 5.4 Cr in losses to Mamaearth.

To make matters worse, Honasa Consumer Limited, had to take a goodwill impairment loss to the tune of INR 136 Cr, forcing it to register a net loss of INR 151 Cr. 

Mamaearth wrote-off goodwill of INR 136 Cr for Just4Kids. Overall, it reported exceptional items before tax of INR 155 Cr in FY23 due to the impairment of goodwill and other intangible assets. Without it, the startup would have reported a net profit of about INR 3.7 Cr during the year under review.

As per Mamaearth’s draft red herring prospectus (DRHP), the net value (assets minus liabilities) of Momspresso was INR 16.2 Cr at the time of its acquisition. The D2C unicorn also paid INR 136 Cr for “goodwill arising on acquisition”.

The startup later increased its stake in Momspresso, with the total acquisition cost coming at INR 167.9 Cr. 

Founded in 2016 by Vishal Gupta, Prashant Sinha, and Asif Mohammed, Momspresso provided parenting tips and pregnancy advice to mothers. Its content was largely generated by women in English, Hindi, and eight other regional languages. 

Momspresso reported an operating revenue of INR 40.4 Cr in FY23 and a net loss of INR 21 Cr. 

Both Gupta and Sinha have now launched a new marketing agency – Pravis. 

Meanwhile, the IPO of Mamaearth is expected to open on October 31 and close on November 2. As per its RHP, the public offering will comprise a fresh issue of shares worth INR 365 Cr and an offer for sale of 41.25 Mn shares.