MUMBAI : Direct-to-consumer (D2C) brand Sugar Cosmetics is looking to raise $100 million in a new funding round that will value the company at around $700-800 million, said three people with knowledge of the development. About 60-70% of this fundraise will happen through issuance of fresh equity and the rest through stake sales by existing investors, they said.
The company is in talks with sovereign wealth funds and private equity funds to raise the amount. However, “it is early days as the deal has just been launched,” said one of the three people.
“The final round construct and valuations will be determined in a few weeks,” he said.
A funding winter in the startup ecosystem has seen companies struggling to raise funds. The Indian venture capital (VC) funding landscape has seen subdued activity both in terms of deal volume and volume in 2023. A total of 811 VC funding deals worth $5.5 billion were announced in the country during the first three quarters (Q1-Q3) of 2023. This represents a year-on-year (y-o-y) decline of 42.3% in terms of VC funding deals volume and a massive 70.4% fall in terms of disclosed funding value, according to GlobalData, a data and analytics company. On the flip side, this has forced companies to be financially prudent and aim for stronger unit economics. A lot of companies in the D2C space have cut back on their marketing and growth spends to conserve cash.
In July 2023, Sugar said it had current annualized sales of around ₹700 crore and was eyeing profitability in FY24.
“Companies that are closer to profitability have a better chance to access capital and Sugar is looking at commanding higher valuation than their previous round,” the second person cited above said.
The Mumbai-based company last raised $50 million in May 2022 in a round led by L Catterton with participation from existing investors such as A91 Partners, Elevation Capital and India Quotient. It was valued at around $450-500 million then.
Prior to that in 2021, it had raised $21 million in its Series C funding round led by Elevation Capital. According to the company, actor Ranveer Singh, invested an undisclosed amount in the brand in December quarter of FY2022.
“Some of the early backers of the company are likely to exit either partly or completely,” the third person cited above said.
A Sugar Cosmetics spokesperson declined to comment.
Founded in 2012 by IIM Ahmedabad alumni and husband and wife duo, Vineeta Singh and Kaushik Mukherjee, Sugar sells cruelty-free beauty products such as foundations, highlighters, concealers and lipsticks. It distributes through 45,000 retail outlets across 550 towns and cities and has more than 200 brand-owned stores across the country.
Sugar competes with beauty and personal care brands such as Mamaearth, Wow Skin Sciences, Good Glam and Nykaa, among others.
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Updated: 09 Nov 2023, 10:42 PM IST