Mensa Brands, led by Ananth Narayanan, a start-up that owns and operates an umbrella of direct-to-consumer (D2C) brands, had a net income of Rs 1,500 crore in the last 12 months of operation ending May 2022.
Mensa Brands Founder and CEO Narayanan, who is also the former CEO of Myntra and Medlife, told FE that the company now aims to double its net sales to Rs 3,000 crore in the next 12 months. .
Mensa embarked on its journey in May 2021 with the intention of partnering with and investing in digitally-driven brands in fashion and apparel, home and garden, beauty and personal care and food, and to make them evolve exponentially. The start-up works closely with the founding teams to accelerate growth in markets, through brand websites and global platforms using a combination of initiatives across product, pricing, marketing , distribution and brand building with a technology platform at its heart.
To date, the company has acquired 20 fashion, beauty and lifestyle brands, and Mensa says the majority of these have grown by 80% over the past 12 months in terms of revenues since their integration with Mensa. Additionally, Mensa also claims to be profitable although the companies have not shared detailed financial data.
Mensa Brands typically acquires a majority stake in these D2C brands, giving it direct control over operations, expansion, and strategy. The turnover achieved by these companies over the past 12 months is recorded as Mensa’s turnover in its books.
“The revenue we recorded for the 20 brands over the past year was Rs 1,500 crore, which is the net revenue reported by each of them. We plan to acquire another 20 brands next year, potentially doubling our overall revenue,” Narayanan said in an interview with FE.
The startup emulates a business model similar to that of US-based Thrasio, which acquires and operates around 100 independent Amazon sellers and direct-to-consumer (D2C) brands. Thrasio is now valued at $10 billion and also reported a profit of $100 million on revenue of $500 million in fiscal 2020. The US-based company is said to have been eyeing the Indian market though. that it has not yet finalized its expansion plans.
Narayanan said that Mensa Brands only acquires already profitable brands with revenues above Rs 20 crore and above and average order value (AOV) ranging from Rs 600 to Rs 6,000. The company also has internal benchmarks that seek customer reviews and ratings of the product, as well as other important metrics such as repeat purchase value and user lifetime value (LTV) prior to acquisition.
“Most of the brands we acquire have top-notch sourcing quality and design and when we integrate they typically have revenue capping at Rs 20-40 crore per annum. We typically try to triple their revenue in just six to nine months after acquisition,” Narayanan added.
Of the Rs 1,500 crore revenue reported by all brands currently managed by Mensa, about 10% comes from offline sales channels. Additionally, more than half of Mensa’s brands are available outside India in the US, Canada, UK, Germany, Singapore and UAE, contributing 20% of revenue, according to Narayanan.
He also added that currently, Mensa only focuses on the three verticals mentioned earlier, but may expand into new categories depending on market dynamics. “The fashion, beauty and lifestyle categories together represent $120 billion in market size in India with gross margins of over 60% and we will be focusing on these segments in the near term. We can be interested in big categories like consumer electronics, but we will never enter the mobile phone market,” Narayanan said.
For example, a menswear brand named Dennis Lingo acquired by Mensa last year has already achieved 2X growth in revenue since the acquisition in October 2021. Narayanan told FE that the brand has already achieved a revenue rate of Rs 100 crore currently. This was possible thanks to the rapid expansion of digital marketing, quality control and the expansion of warehouses into new geographies, he added.
Talking about fundraising plans, Narayanan said that Mensa has not yet used up all of its capital and currently has a large amount of dry power. Mensa has raised a total of over $300 million in equity and debt since its launch last year. “We still have enough money in the bank, especially for the next 20 acquisitions next year. We are not raising capital immediately,” Narayanan said.