Direct-to-consumer provider of cosmetics and personal care A valuation roadblock has reportedly halted Good Glamm Group’s (GGG) efforts to acquire the Raymond Group’s consumer care division, which includes the Park Avenue and Kamasutra brands.

Existing GGG investors have voiced their concerns regarding the Rs 3,000 crore cash-and-stock agreement that the two parties were negotiating. “Economic and integration flywheel of the spate of past acquisitions still need to be addressed,” they claim.

Three people with direct knowledge of the development said that raising debt for the acquisition against the backdrop of interest rate hikes, inflation, and the collapse in global technology valuations is also proving to be difficult.

GGG, founded by Darpan Sanghvi, has acquired twelve brands and businesses in the past 24 months, including PopXo, Mom’s Co, Baby Chakra, ScoopWhoop, MissMalini Entertainment, Sirona, and St Botanica. A $250 million new financing round at a $2 billion valuation that the company has been trying to put together is taking longer to complete as revenues for most direct-to-consumer companies are under pressure.

If the Good Glamm-Raymond deal is completed, the new age company would have unmatched access to the retail network that the Raymond Group has built. The deal has been hailed as one of the biggest M&As in the consumer space that is currently under consideration. Additionally, it would be Good Glamm’s entry into the category of men’s personal care and sexual wellness.

“The deal faces numerous obstacles. The value of the agreement is also being renegotiated by both parties, according to a person with direct knowledge of the negotiations.

According to sources, GGG is also taking longer to close its $250 million new funding round. The value is being reviewed, but the current investors want to top up. Another person added, “And, whether to add a new investor on board or just to keep it as an internal round is yet to be decided. The new funding would be limited to $150–175 million at a valuation of $1.5–1.7 billion if it were an internal round, the source continued.

GGG raised $150 million from investors led by Prosus last year (formerly Naspers). Additionally, it has funds as investors, including Warburg Pincus, L’Occitane, Bessemer Venture Partners, Accel NSE 4.22 percent, Amazon, and Ascent Capital. With the completion of its Series-D funding round in November of the previous year, the company joined the unicorn club of businesses with a valuation of over $1 billion.

An anonymous company executive claimed that following the various acquisitions, the company had higher user engagements. In addition to the 500,000 users of the Good Glamm brand, the company now has 250,000 new monthly users, the source claimed. He claims that the brands have also experienced “hockey-stick growth” since the integration, with 30% more revenue as a result of the group’s content to commerce funnel.

After private equity firm KKR bought a sizeable majority stake in Vini Cosmetics, which sells Fogg and other perfume and deodorant brands, the proposed acquisition of Raymond’s consumer business would be the second significant deal in the perfume category in India.

This would be the Good Glamm Group’s second offline acquisition after it bought the organic beauty and personal care company Organic Harvest in January.

According to sources, Raymond’s consumer care company, which generates about Rs 750 crore in annual revenue, has recovered from the Covid setback and is now posting pre-pandemic sales levels. “Even though the numbers have improved, the incremental growth has been somewhat muted, and there have been some changes made to the portfolio’s value. Raymond’s request is for more than Rs 3,000 crore, whereas GGG estimates it to be worth Rs 2,000 crore, one of the people said.

The Singhania family owns the remaining 48% of the consumer care company, which is owned by the Raymond Group. If Raymond can close a deal worth Rs 2,500–3,000 crore, he will be net debt free. Its net debt was Rs 1,250 crore at the end of December, and an analysis by ET indicates that by the end of the fiscal year in March, it should have decreased. Net sales for the first nine months of FY22 increased by two times to Rs 4,220 crore, while net loss decreased from Rs 353 crore to Rs 3 crore. The amount spent on interest during this time was Rs 170 crore.