Mumbai-based Sugar Cosmetics, a direct-to-consumer beauty brand, has raised INR 38 crore ($4.5 million) in a fresh funding round, led by existing investors such as Anicut Equity Continuum Fund, Elevation Capital, Malabar Investment, and L Catterton. This new investment comes with the goal of scaling operations and expanding into new segments while maintaining the company’s valuation of INR 2,600-2,700 crore, consistent with its previous round in 2022.
New Funding to Support Strategic Growth
Despite the relatively stable valuation, this funding marks an important step in Sugar Cosmetics’ journey, as it aims to bolster its market position and diversify its offerings. Sugar’s co-founder and COO, Kaushik Mukherjee, clarified that the investment would be phased over time, with existing investors continuing to support the company in tranches.
This funding also follows a secondary stake sale last year, where Malabar Investments purchased an INR 80 crore stake from early investors India Quotient and RB Investments. There are expectations of more secondary transactions in the coming year, potentially providing exit opportunities for some of the company’s initial backers.
Focus on Expanding Skincare and Affordable Cosmetics
The majority of the newly raised capital will be directed toward expanding Quench Botanics, a Korean skincare brand launched in collaboration with Bollywood actress Kareena Kapoor in 2023. Mukherjee highlighted that the skincare line has seen significant traction, particularly in the e-commerce and quick-commerce segments, and is poised for further growth.
In addition to scaling its skincare brand, Sugar aims to strengthen its presence in the affordable cosmetics market through its SUGAR POP sub-brand. The company plans to enhance distribution channels to make its color cosmetics more accessible to a wider audience.
Navigating Financial Growth and Profitability
For FY24, Sugar Cosmetics reported an operating revenue of INR 505.1 crore, reflecting a 20% growth compared to INR 420 crore in FY23. Despite this progress, the company’s net losses narrowed by 11% to INR 67.6 crore, signaling an increased focus on profitability.
Sugar’s management has prioritized profit over aggressive revenue expansion, aligning with plans for an IPO within the next two to three years. Although growth has slowed to 35-40% in FY24, the company is projected to surpass INR 500 crore in revenue, with a negative EBITDA margin of under 12%.
A spokesperson for the brand shared that there has been notable interest from both domestic and international private equity funds. However, given the company’s profitability since December 2023, there is no immediate need for new primary investment. Discussions are instead focused on secondary stake sales at a higher valuation than the company’s last round.
Expanding Reach and Market Position
Sugar Cosmetics was founded in 2015 by Vineeta Singh and Kaushik Mukherjee as a pure-play online D2C brand. Since then, the company has expanded to over 45,000 retail stores across India, adopting an omnichannel approach in response to changing market dynamics.
The brand has diversified over time, introducing affordable cosmetics through the SUGAR POP sub-brand, expanding into accessories and merchandise via Sugar Merch Station, and partnering with Kareena Kapoor for Quench Botanics. These moves have helped Sugar establish itself as a leading player in the youth-centric cosmetics space, although the market has become increasingly competitive with the rise of new entrants.
Backing from Notable Investors
Sugar’s investor roster includes heavyweights like L Catterton, Anicut Capital, Elevation Capital, and family offices from industry leaders like Hero Group’s Pawan Munjal and DCM Shriram’s Ajay Shriram. Early-stage investors India Quotient and RB Investments hold approximately 11% and 10% stakes, respectively, while the co-founders retain a combined 25% stake.
Malabar Investments, which has also backed other consumer-centric brands like Boat and Bombay Shaving Company, sees this deal as a strategic fit to expand its consumer portfolio. This aligns with Malabar’s focus on scaling companies with high growth potential.
