Samara Capital Plans Exit from ESME Consumer Valued Between $175-225 Million

Samara Capital, a prominent mid-tier private equity firm concentrating on the Indian market, is reportedly initiating plans to exit its complete ownership of ESME Consumer, a company specializing in personal care and beauty products. To facilitate this divestment, Samara Capital has appointed the investment bank Jefferies. The deal has been launched recently and is expected to be valued between $175 million and $225 million, with approaches planned for both strategic and financial buyers.

ESME Consumer was established by Samara Capital in 2019 through the acquisition of majority stakes in Blue Heaven Cosmetics and Nature's Essence. The objective was to build a scaled mass-market personal care business with shared operational costs. Blue Heaven is the larger brand, offering a range of colored cosmetics, while Nature's Essence primarily serves salons. ESME Consumer reaches customers through a distribution network of over 30,000 channels.

Financially, ESME reported a consolidated revenue of ₹324.6 crore in FY24, a decrease from ₹375.4 crore in FY23. Its Ebitda margins also saw a decline to 4.36% in FY24 from 10.84% in FY23. This reduction in revenue was attributed to management's decision to pull back certain products supplied during the pandemic, leading to expiry pile-ups, which also resulted in an Ebitda loss for FY24. However, India Ratings anticipates a recovery in ESME's topline for FY25, with revenue for the first five months of FY25 standing at ₹166.5 crore.

The Indian beauty and personal care market is a significant growth area, estimated at $21 billion in 2024 and projected to reach $34 billion within three years, driven by increased consumer awareness, product accessibility, and the rise of e-commerce.

Impact: This potential exit by Samara Capital is significant for the Indian private equity landscape and the consumer goods sector. It highlights continued investor interest in India's rapidly growing beauty market and could stimulate further M&A activity. A successful sale or IPO would demonstrate the potential for value creation in the Indian consumer space. Rating: 7/10

Difficult Terms: • Private Equity (PE) Firm: An investment company that pools capital from sophisticated investors to acquire stakes in private companies, aiming to improve their value and sell them for a profit. • Exit: The process by which a private equity firm sells its investment in a company to realize its profits. • Valuation: The process of determining the current worth of an asset or a company. • Strategic Buyer: A company that acquires another business to gain advantages such as market share, technology, or new products. • Financial Buyer: An investor, typically a private equity firm, that purchases a company primarily for its financial returns, rather than for strategic synergy. • IPO (Initial Public Offering): The process through which a privately held company sells its shares to the public for the first time, becoming a publicly traded entity. • Ebitda (Earnings Before Interest, Depreciation, Tax, and Amortisation): A financial metric used to assess a company's operating performance and profitability before accounting for interest expenses, taxes, depreciation, and amortization. It represents a proxy for cash flow from operations. • Roll-up: A strategy where a company acquires multiple smaller companies within the same industry to create a larger, more consolidated entity, often achieving economies of scale.