Direct-to-consumer beauty and personal care company Good Glamm Group’s (GGG) efforts to acquire the consumer care business of the Raymond Group that houses the Park Avenue and Kamasutra brands has hit a valuation roadblock, said people in the know.
Existing investors of GGG have expressed their reservations about the Rs 3,000 crore cash-and-stock deal that both sides were negotiating. According to them, “economics and integration flywheel of the spate of past acquisitions still need to be tested,” said one of the people.
Raising debt for the acquisition in the backdrop of interest rate hikes, inflation and the meltdown in global technology valuations, is also proving to be a challenge, three people with direct knowledge of the development said.
Spokespersons for Raymond and Good Glamm declined to comment on what they called market speculation.
ET was the first to report on the proposed GGG-Raymond deal on May 4.
In the last 24 months, Darpan Sanghvi-founded GGG has acquired a dozen brands and companies such as PopXo, Mom’s Co, Baby Chakra, ScoopWhoop, MissMalini Entertainment, Sirona and St Botanica. With revenues for most direct-to-consumer companies coming under pressure, a new financing round of $250 million at a $2 billion valuation that the company has been trying to stitch together is taking longer to get done.
In what has been touted as one of the biggest M&As in the making in the consumer segment, the Good Glamm-Raymond deal, if it is completed, would give the new-age company an unparalleled access to the retail network that the Raymond Group has built. It would also mark Good Glamm’s entry into the men’s personal care and sexual wellness category.
“There are many challenges for the deal. Both parties are also renegotiating certain terms of the deal, especially value,” said a person with direct knowledge of the deal.
GGG is also taking longer to stitch up its new funding round of $250 million, sources said. “The existing investors want to top up, but the value is being reconsidered. And, whether to bring in a new investor on board or just to keep it as an internal round is yet to be decided,” said another person. If it is an internal round, the new funding would be limited to $150-175 million at a $1.5-1.7 billion valuation, the person added.
Last year, GGG had raised $150 million from investors led by Prosus (formerly Naspers). It also counts funds such as Warburg Pincus, L’Occitane, Bessemer Venture Partners,
, Amazon and Ascent Capital as its investors. The company entered the unicorn club of companies with a valuation of more than a billion dollars with its Series-D funding round in November last year.
According to a company executive who spoke anonymously, the company has seen higher user engagements post the various acquisitions. “The company now has 250,000 new monthly users in addition to the 500,000 users of the Good Glamm brand,” the person said. According to him, the brands have also seen a “hockey-stick growth” post the integration with 30% more revenue due to the content to commerce funnel that the group offers.
The proposed acquisition of Raymond’s consumer business would be the second big deal in the perfume category in India after private equity firm KKR acquired a significant majority stake in Vini Cosmetics that sells Fogg and other perfume and deodorant brands.
For the Good Glamm Group, this would be its second offline acquisition after it bought Organic Harvest, an organic beauty and personal care brand, in January.
Raymond’s consumer care business with revenue of around Rs 750 crore has recovered from the Covid setback and is now clocking pre-pandemic sales numbers, sources said. “Though the numbers have bounced back, the incremental growth has been somewhat muted and there are some renegotiations around the value of the portfolio. While GGG is pegging it at Rs 2,000 crore, Raymond’s ask stands at more than Rs 3,000 crore,” one of the people said.
The Raymond Group owns around 48% of the consumer care business while the remaining stake is held by the Singhania family. A deal of Rs 2,500-3,000 crore could help Raymond become net debt-free. Its net debt at the end of December was Rs 1,250 crore and it is estimated to have come down by the end of the fiscal year in March, an ET analysis shows. Its net sales for the first nine months of FY22 doubled to Rs 4,220 crore, while net loss reduced to Rs 3 crore from Rs 353 crore a year earlier. Interest outgo during this period was Rs 170 crore.
Source: Economic Times