Samara Capital preps full exit from ESME Consumer, appoints banker
The company appointed investment bank Jefferies to facilitate the full exit and the deal was initiated several weeks ago, the first person said.
The second person said the deal could be in the $175-$225 million valuation range and that both a strategic and financial buyer should be approached. Both individuals requested that their names not be mentioned in this report.
IPO Backup
The second person added that Samara may also consider offering the asset to the public if the private sale does not occur at an appropriate valuation.
Jefferies declined to comment, while Samara Capital and ESME Consumer did not respond MintRequests for comment Thursday.
After acquiring majority stakes in two New Delhi-based personal care companies, Blue Heaven Cosmetics and Nature’s Essence, in 2019, Samara founded ESME with the aim of creating a scaled, mass-market personal care business at shared costs. Blue Heaven, the larger of the two brands, sells a variety of color cosmetics such as mascara, lip crayons, foundation sticks, compact powders; Nature’s Essence is a smaller service aimed at salons.
ESME sells through more than 30,000 distribution channels, and Samara makes key operational and strategic decisions for the combined organization.
ESME has reported consolidated revenues so far in FY24: ₹324.6 crore ₹375.4 crore a year ago, according to India Ratings.
ESME’s EBITDA margin also decreased to 4.36% from 10.84% in FY23. An India Ratings report from last year highlighted that the decline in revenue was due to the management’s decision to withdraw products procured during the pandemic period, which led to a backlog at maturity. This also led to EBITDA loss for the entities in FY24.
Ebidta, which means earnings before interest, depreciation, taxes and amortization, represents the remaining cash profit in the company. Ebitda also adds restructuring costs to this figure.
India Ratings, in its report, mostly focuses on Tiers I and II in northern and eastern India. He expected revenue for ESME, which sells in tier cities, to recover in FY25. Its revenue for the first five months of FY25 was as follows: ₹166.5 crore, the last period for which company financial statements are available.
growing market
India’s beauty and personal care market has grown rapidly in recent years, driven by increasing consumer awareness and wider product availability. E-commerce and fast trade routes combined with an omni-channel strategy have further increased the demand for such products. Last year, consultancy firm Redseer predicted that India’s beauty and personal care market, worth $21 billion by 2024, was expected to reach $34 billion in the next three years.
Natasha Treasurywala, partner at law firm Desai & Diwanji, says the beauty and personal care category is seeing massive growth, thanks to increasing demand from smaller Indian cities due to rising disposable incomes, social media influence and e-commerce. “Multinational companies are also always looking for good strategic opportunities in India,” he said.
Led by Sumeet Narang, Samara, which is in the process of closing its third fund, has generated healthy returns from its previous funds. His second fund, which exited most of his investments, showed a gross 3.5x increase in invested capital, with an internal rate of return of 25%. Mint reported earlier this year.
Some of Samara’s notable exits from the second fund include the sale of Spoton Logistics to Delhivery; sale of shares in AIG Hospital to Quadria Capital; Sale of Lotus Surgicals to Tube Investments and Premji Invest; and the sale of shares in Oaknet Healthcare to Eris Lifesciences.
It also transferred stakes in medical device firm Sahajanand Medical Technologies Ltd and staffing firm First Meridian Business Services Pvt. Ltd and biryani restaurant Paradise Food Court through a $150 million follow-on fund led by TR Capital in 2023.
To date, Samara has deployed approx. ₹10,000 crore in all its funds. The India-focused private equity firm typically invests in mid-market companies poised for growth, focusing on the consumer, retail, healthcare, pharmaceutical, financial services, business services and technology sectors. The firm has made over 25 acquisitions, including roll-ups for portfolio companies, across its three funds.
Acquisition involves purchasing and merging smaller companies in the same industry to create a larger consolidated entity. Bain Capital and Carlyle also used this strategy to consolidate their acquisitions in auto components and pharmaceuticals.
Over the years, Samara’s average ticket size has been seen increasing. ₹300-700 crore including co-investments in second fund ₹500 crore ₹1,500 crore range in third fund.
