SUGAR Cosmetics has raised ₹144.5 crore from A91 Partners at a valuation of about ₹755 crore, roughly 75% below its ₹3,000 crore peak. Other reports put the new valuation even lower, at ₹500-600 crore. The tempting conclusion is that India's D2C valuation bubble has finally caught up with SUGAR. The numbers suggest something more serious: SUGAR appears to have built a business with excellent product margins but poor operating leverage.

Consider what SUGAR itself disclosed at the height of its expansion. In FY23, gross margin was around 72%. Its online average cart value was about ₹1,200, offline was ₹1,800, and customer acquisition cost was said to be below ₹400. On paper, these are attractive economics. A ₹1,200 order at 72% gross margin leaves more than ₹850 before marketing, fulfilment and overhead. Yet SUGAR still spent ₹162.6 crore on advertising in FY23 and another ₹161.6 crore in FY24. Advertising alone was about 32% of FY24 revenue.

That spending worked until it didn't. Revenue jumped from ₹226 crore in FY22 to ₹420 crore in FY23 and ₹505 crore in FY24. Management was talking about ₹1,000 crore-plus revenue, profitability and an IPO. Instead, FY25 revenue fell 20% to ₹404 crore and net loss doubled from ₹68 crore to ₹135 crore.

This is difficult to blame on the market. Nykaa's beauty business grew revenue 25% in FY25 and operated at an 8.9% EBITDA margin. Its beauty GMV grew 30%. More recently, Nykaa's beauty net sales were still growing 29% in the June 2026 quarter. SUGAR therefore shrank while one of its largest competitors continued gaining scale.

The more likely mistake was offline expansion. SUGAR went from a digital challenger to roughly 50,000 retail outlets and 200 owned stores. Vineeta Singh once described offline CAC as effectively zero once a store breaks even. That logic is correct only when the store actually breaks even. Rent, staff, inventory, testers and working capital turn "free acquisition" into a fixed-cost machine very quickly.

This also explains why the valuation reset is so large. At ₹3,000 crore, investors were valuing SUGAR at roughly six times FY24 revenue and paying for years of future growth. At ₹755 crore, the multiple is below two times FY25 revenue. The 20% revenue decline did not destroy 75% of the valuation.

Investor behaviour makes the point sharper. In 2024, early shareholders were discussing secondaries at around ₹2,900 crore. Two years later, investors are looking for exits at steep discounts while A91 is supplying almost the entire rescue round.

For Shark Tank judges like Vineeta Singh, there is an uncomfortable lesson here. She gives SUGAR something most startups spend heavily to obtain: constant national visibility. But visibility solves awareness, not repeat purchase. If a famous founder, 50,000 retail points, 72% gross margins and ₹160 crore of annual advertising cannot stop revenue from falling, the problem is probably deeper than marketing.

Let’s go through what else is happening in Indian startup world - Grab your simmering cup of StartupChai.in and unwind with our hand-brewed memes.

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