Direct-to-consumer beauty brand, Sugar Cosmetics, is gearing up for a significant funding round, targeting $100 million to fuel its expansion plans. The fundraising effort is expected to value the company at approximately $700-800 million, according to sources familiar with the matter. Roughly 60-70% of the capital infusion will be generated through the issuance of fresh equity, with the remainder coming from stake sales by existing investors.
The Mumbai-based cosmetic company is reportedly in discussions with sovereign wealth funds and private equity firms to secure the funds. However, insiders caution that it’s still early in the process, and the final terms, including the round’s structure and valuation, will be determined in the coming weeks.
The decision to seek a significant capital injection comes amid a broader funding slowdown in the startup ecosystem. Many companies have faced challenges in securing funding in the current venture capital landscape. In the first three quarters of 2023, the Indian startup ecosystem experienced a decline in both deal volume and disclosed funding value. A total of 811 VC funding deals worth $5.5 billion were recorded, reflecting a year-on-year decline of 42.3% in deal volume and a substantial 70.4% fall in disclosed funding value, according to GlobalData.
The funding winter has prompted companies to adopt a more conservative approach to financial management, focusing on achieving stronger unit economics. Several players in the direct-to-consumer (D2C) space have implemented cost-cutting measures, especially in marketing and growth expenditures, to preserve cash.
Sugar Cosmetics, however, appears to be positioning itself favorably within this challenging funding environment. In July 2023, the beauty brand announced annualized sales of approximately ₹700 crore and expressed its intention to achieve profitability in the fiscal year 2024. The company’s proximity to profitability is seen as a strategic advantage, potentially enhancing its ability to secure capital at a premium valuation.
The upcoming funding round marks the latest chapter in Sugar Cosmetics’ capital-raising journey. In May 2022, the company successfully closed a $50 million funding round led by L Catterton, with participation from existing investors such as A91 Partners, Elevation Capital, and India Quotient. At that time, the valuation stood at around $450-500 million.
Before that, in 2021, Sugar Cosmetics secured $21 million in its Series C funding round, spearheaded by Elevation Capital. Notably, actor Ranveer Singh also made an undisclosed investment in the brand during the December quarter of FY2022. As the company gears up for its latest funding endeavor, some of its early backers are expected to consider exiting, either partially or completely, according to industry insiders.
Founded in 2012 by IIM Ahmedabad alumni Vineeta Singh and Kaushik Mukherjee, Sugar Cosmetics has carved a niche for itself in the beauty industry. The brand is known for offering cruelty-free beauty products, including foundations, highlighters, concealers, and lipsticks. With distribution channels spanning 45,000 retail outlets across 550 towns and cities, along with over 200 brand-owned stores, Sugar Cosmetics competes with other prominent beauty and personal care brands such as Mamaearth, Wow Skin Sciences, Good Glam, and Nykaa.
While Sugar Cosmetics remains tight-lipped about the ongoing developments, industry observers are keenly watching how the company’s funding strategy unfolds in the coming weeks.