Spanner In The Works? SEBI Seeks Clarification From Mamaearth, OYO On Proposed IPO

Market regulator Securities and Exchange Board of India (SEBI) has sought clarification from D2C beauty ecommerce startup Mamaearth and hospitality giant OYO on their respective draft red herring prospectus (DRHP) for their initial public offerings (IPOs). 

Without specifying any details, the markets watchdog said it is awaiting response from the ‘Lead Manager’ of the two startups regarding the DRHP. 

The disclosures were part of the latest weekly update, issued on April 28, on the processing status of draft offer documents filed with SEBI. The note also said that the regulator might issue further observations on the DRHP in the next 30 days, depending on receiving satisfactory reply from the company on the concerns flagged by SEBI.

Inc42 has reached out to both Mamaearth and OYO for details and their comments on the development. The story will be updated on receiving responses from them.

The latest development comes five months after the beauty ecommerce platform filed its DRHP with SEBI for a public market listing. Mamaearth’s proposed IPO comprises a fresh issue of shares worth INR 400 Cr and an offer for sale element of up to 46,819,635 equity shares.

The company plans to use the proceeds to shore up advertising and to fuel inorganic growth via acquisitions. It also plans to use a portion of the capital raised to set up new exclusive brand outlets and new salons under BBlunt brand.

As per its DRHP, cofounders Ghazal and Varun Alagh, along with other institutional investors such as Sofina Ventures SA, Evolvence and Fireside Ventures, would sell shares in the IPO. Angel investors such as Snapdeal founder Kunal Bahl, Bollywood actress Shilpa Shetty Kundra, Rishabh Harsh Mariwala will also sell shares in the OFS. 

Curiously, Sequoia Capital, which is one of the biggest investors in the company, will not dilute its stake.

Soon after it filed the draft documents, the startup came under criticism from Twitter users for allegedly seeking a valuation of $3 Bn. While the startup’s last private valuation stood at $1.3 Bn, online users raised questions over the new valuation and its balance sheet. Such was the clamour that Ghazal Alagh issued a clarification saying that the company has not subscribed to the valuation numbers. She added that valuation discovery would take place over a period of time after ‘deeper conversations’ with their investors. 

Subsequently, in March this year, reports surfaced that the D2C beauty ecommerce unicorn had put its IPO plans on the backburner owing to weak market conditions. However, Mamaearth rejected this and said that it was engaging with SEBI and waiting for formal approval from SEBI to go ahead with the IPO. 

On the other hand, OYO’s IPO plans have hit another major roadblock with SEBI’s decisions. Previously, the market regulator had returned OYO’s DRHP and directed it to refile it. The company eventually refiled the draft document in March this year. It also cut the size of its IPO to $400-600 Mn from $1.2 Bn previously.

The development comes as a slew of new-age tech companies including PharmEasy, Droom, Snapdeal and MobiKwik have either shelved or postponed plans to go public.