Mamaearth Parent Honasa Consumer IPO - Review, Opening Date

Honasa Consumer Limited - Complete Overview

The parent company of Mamaearth, Honasa Consumer Limited, is set to launch its IPO in October. Established in 2016, it holds the distinction of being the largest digital-first beauty and personal care company in India in terms of revenue from operations.

The company's primary mission is to create products that address the beauty and personal care needs of consumers and it serves customers in 500 cities across India.

Within its portfolio, the company boasts six brands: Mamaearth, The Derma Co., Aqualogica, Dr. Sheth's, BBlunt, and Ayuga. Additionally, it has acquired a stake in the content platform Momspresso.

Mamaearth, the company's flagship brand, has achieved remarkable growth and become the fastest-growing brand in the beauty and personal care sector in India. It reached an annual revenue of Rs. 10 billion within the preceding 12 months, just six years after its launch.

Mamaearth is dedicated to fulfilling fundamental consumer demand for products that are both safe and composed of natural ingredients, with a primary emphasis on creating beauty items that are free from harmful toxins.

According to the RedSeer Report, Mamaearth claimed the top spot as India's most frequently searched brand in the Beauty and Personal Care (BPC) category on Google Trends from January 2020 to June 2023. 

Additionally, Mamaearth achieved a position within the top three for brand awareness in the grooming category on Flipkart between May 2021 and July 2023.

With the backing of investors like Sequoia Capital India, Sofina SA, Fireside Ventures, and Stellaris Venture Partners, the company aspires to reach a valuation of $1 billion.

The company's product range encompasses baby care, face care, body care, hair care, colour cosmetics, and fragrances.

 

What does the company do?

Honasa Consumer Limited is the largest beauty and personal care company.

 

 

Company Products 

The company's product range encompasses baby care, face care, body care, hair care, colour cosmetics, and fragrances.

 

Detailed Video

 

IPO Overview

The Honasa Consumer Limited IPO date is set to take place from October 31 to November 2, 2023. The upcoming IPO anticipated listing date is November 10, 2023. 

The company has not yet disclosed the IPO price, and it is categorized as a Book Built Issue IPO. Regarding share allocation, 75% is designated for institutional investors, 15% for non-institutional investors, and 10% for retail investors.

 

Honasa Consumer Limited IPO timetable (Tentative)

Events	Date
IPO Opening Date	31 October 2023
IPO Closing Date	2 November 2023
IPO Allotment Date	7 November 2023
Refund initiation	8 November 2023
IPO Listing Date	10 November 2023

 

Honasa Consumer Limited IPO Details 

IPO Opening & Closing Date	31 October to 2 November 2023
Face value	Rs.10 per Share
Issue Price	Rs. 308 to Rs. 324 per Share
Lot Size	46 Shares
Price of 1 lot	Rs. 14,904
Issue Size
Offer for Sale	41,248,162 shares of Rs.10 (aggregating up to Rs. [.] Cr)
Fresh issue	[.] Shares (aggregating up to Rs. 365.00 Cr)
Listing at	BSE, NSE
Issue Type	Book Built Issue IPO
Registrar	KfinTechnologies Ltd.

 

Honasa Consumer Limited IPO Lot Details 

Minimum Lot Investment (Retail)	1 Lot
Maximum Lot Investment (Retail)	13 Lot
Minimum Lot Investment (S-HNI)	14 Lot
Maximum Lot Investment (S-HNI)	67 Lot
Minimum Lot Investment (B-HNI)	68 Lot

 

Honasa Consumer Limited IPO Reservation

Institutional share Portion	75%
Non-institutional share Portion	15%
Retail share Portion	10%

 

Company Financial

Amount in Crores

Period	FY 22	FY 21	FY 20
Total Assets	1,035.01	302.64	181.01
Total Revenue	964.35	472.10	114.17
PAT	14.55	-1,332.21	-428.05
Net worth	705.62	-1,765.14	-437.17
Reserve & Surplus
Total Borrowings	3.59	1,954.00	592.76

 

Important KPI's of the Company

Metric	FY 23	FY22	FY21
Number of brands	6	5	2
Revenue from operations (Rs. in million)	14,927.48	9,434.65	4,599.90
Revenue from online channels (Rs. in million)	8,861.04	6,595.34	3,742.93
Revenue from offline channels (Rs. in million)	5,394.08	2,723.38	856.97
Revenue from services (Rs. in million)	672.36	115.93	-

 

Revenues Derived from our Direct-to-Consumer Channel and from Third-party E-Commerce Marketplaces

(Amount in Million)

Particulars	FY 23	FY22	FY21
Direct-to-consumer channel	3,733.43	2,981.69	1,582.53
Third party ecommerce marketplaces	5,127.61	3,613.65	2,160.40
Total / Revenue from online channel	8,861.04	6,595.34	3,742.93

 

Objective of the Issue

The intended use of the Net Proceeds include financing the following objectives:

• Allocation for advertising expenses aimed at improving brand awareness and visibility.
• Capital expenditure to establish new Exclusive Brand Outlets (EBOs).
• Investment in our subsidiary, Bhabani Blunt Hairdressing Private Limited ("BBlunt"), to establish new salon facilities.
• General corporate purposes and potential unspecified inorganic acquisitions.

 

Promoters and Management of Honasa Consumer Limited

Varun Alagh and Ghazal Alagh are the promoters of the company.

Pre-issue Promoter Shareholding	37.41%
Post-issue Promoter Shareholding

 

Peer Comparison

According to Honasa Consumer Limited IPO DRHP, there are no companies, both in India and on a global scale, that are of a comparable size and operate within the same industry as our company.

 

IPO's Valuations

In December 2022, Mamaearth filed its DRHP with a valuation of around Rs. 24,000 crores, even though its profit was only Rs. 14 crores. The IPO was planned to be launched at a valuation nearly 1,666 times higher, which made the IPO seem significantly overpriced.

Now, looking at the current IPO pricing of Rs. 308 and Rs. 324, with a valuation of Rs. 10,425 crores, it's important to note that the company is operating at a loss of Rs. 150.97 crores, with FY23 revenue at 1,492.74 crores. In terms of revenue, the IPO's valuation is approximately 7 times higher than the revenue. When compared to the previous year's profit of 14.55 crores, the IPO's valuation is 716 times higher. To calculate this, you simply divide the total valuation of 10,425 crores by the FY22 profit of 14.55 crores. This decrease in valuation from the initial Rs. 24,000 crores to around Rs. 10,000 crores. What is the reason behind this decrease in Valuation?

The reason is attributed to public skepticism and social media backlash regarding the high valuation for a loss-making company.

Investing in IPOs of loss-making companies like Mamaearth, Paytm, Nykaa, and Delhivery carries inherent risks, and the public may not benefit from these IPO's. Shilpa Shetty, who holds shares of Mamaearth at Rs. 41.86 per share, stands to make a profit when the IPO is priced at Rs. 324. She may earn 15.65 crores in profit. Other major and famous shareholders include Varun and Ghazal Alagh with 37.53% ownership and Fireside Ventures Fund with 10.39% ownership, and Shilpa Shetty with 0.52% ownership. It's worth noting that some major shareholders, including Shilpa Shetty, are looking to profit from the IPO, indicating a focus on profit booking.

The trend of startups going public while not yet being profitable is not uncommon. Retail investors are drawn in by the name, but because the company is not profitable, the shares don't perform well, and retail traders are left disappointed. Mamaearth's decision to go public in 2023, shortly after achieving profitability in 2022, suggests a desire to capitalize on their profits. However, the high valuation and the company's current losses make this IPO a risky investment. The company operates in a basic product business, and according to Statista's data, the Beauty and Personal Care market revenue is expected to grow at a CAGR of 3.38% from 2023 to 2027.

The company operates in a competitive industry, and with slow industry growth, questions arise about its potential for substantial growth. In such a scenario, a high valuation places this IPO in the risky category. For an investment to be sensible, the company should ideally have a track record of profitability over five years, as brand value alone is not sufficient for sustained growth. If it were, Kingfisher's brand value would have saved it, but it didn't, and it lost all its value after incurring losses.

 

Dividend Policy

The company has not distributed any dividends in the past financial years, and the potential for future dividend payments is contingent upon the company's financial earnings.

 

IPO's Strengths

• Proficiency in constructing and nurturing brands along with the development of repeatable strategies.
• Focused on innovating consumer-centric products.
• Utilizing a digital-first omnichannel distribution approach.
• Employing data-driven marketing tailored to specific contexts.
• Demonstrating the capacity to foster growth and profitability with efficient capital utilization.
• A company led by its founder and supported by a robust professional management team.

 

IPO Weaknesses

• The company depends significantly on a limited range of products for a substantial portion of its revenue.
• Past financial records indicate that the company has faced periods of losses.
• The majority of the company's revenue is generated from the sale of products under its flagship brand, Mamaearth.
• The reliance on celebrities and social media influencers as integral components of the company's marketing strategy could potentially have adverse effects on its business and demand for its services.
• Historically, the company has encountered negative cash flows from its operational, investment, and financing activities.
• Intense competition in its industry poses a risk of market share reduction for the company.
• Subsidiaries acquired by the company in the past, such as Just4Kids, BBlunt, B:Blunt Spratt, and Fusion, have reported losses during certain periods in their history.
• The company is exposed to payment-related risks, which encompass concerns associated with cash-on-delivery transactions and payment processing.
• The company and its subsidiaries currently have pending litigation against them.
• Compliance with environmental, health, employee, and safety laws and regulations is a requirement for the company.

 

 

IPO GMP Today

The Latest GMP of Honasa Consumer Limited IPO is Rs. 47.

 

Conclusion

The company operates within a highly competitive market and has previously incurred losses. It offers a diverse range of products to serve India's extensive consumer base, utilizing an omnichannel distribution strategy. There is a notable and somewhat questionable surge in the company's revenue during the fiscal year 2022. In light of this, investors are strongly recommended to conduct a thorough and meticulous analysis before making any investment decisions.

 

Finowings IPO Analysis

Hope you enjoyed the Finowings IPO Analysis. We tried our best to give every required detail about the company that you should know before applying to the IPO. 

You must consult your financial advisor before making any financial decisions. 

To Apply for the IPO, Click Here.

 

To Read the Prospectus of the Company Click Here to Download the DRHP.

 

 

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