Honasa Consumer IPO (Mamaearth IPO) – Should you Invest?

Mamaearth IPO (Honasa Consumer Limited IPO) has opened for subscription on October 31, 2023. Honasa Consumer Limited provides beauty and personal care products through its digital platform. Company has generated strong revenue in the last few years. Should you invest in Mamaearth IPO? In this article, we would provide Honasa Consumer Limited IPO (Mamaearth IPO) Review, IPO Details, Risk Factors, Positive Aspects which can help investors who might think to invest or not.

Mamaearth IPO Dates and Key Details

IPO Opening Date 31-Oct-23
IPO Closing Date 02-Nov-23
IPO Listing Date 10-Nov-23
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 308 to Rs 324 per equity share
Lot Size 46 Shares
Listing at BSE and NSE
Total Issue Size Rs. 1701 Crores
    Fresh issue     Rs. 365 Crores
    OFS     Rs. 1336 Crores
Employee Discount Rs.30 Per Share

Mamaearth IPO Time Table

IPO Opens on 31-Oct-23
IPO Closes on 02-Nov-23
Basis of Allotment 07-Nov-23
Initiation of Refunds 08-Nov-23
Credit of Shares to Demat 09-Nov-23
Listing Date 10-Nov-23
Cut-off time for UPI mandate confirmation 2-Nov-23 – 5 pm

About Honasa Consumer Limited

Incorporated in 2016, Honasa Consumer Limited (HCL) started selling beauty and personal care products on the internet.

HCL is a company based on values like honesty, natural ingredients, and safety. They serve more than 500 cities in India and have their own brands like Mamaearth, The Derma Co., Aqualogica, Dr. Sheth’s, and Ayuga. They also invested in BBLUNT and Momspresso.

With support from Sequoia Capital India, Sofina SA, Fireside Ventures, and Stellaris Venture Partners, HCL aims to become a $1 billion company. As of June 30, 2023, they offer products for baby care, face care, body care, hair care, makeup, and fragrances. The company is good at making new products and has many ways to sell them both online and in stores

Honasa Consumer Limited – Core Strengths

  • Brand building capabilities and repeatable playbooks
  • Consumer-centric product innovation
  • Digital-first omnichannel distribution
  • Data-driven contextualized marketing
  • Ability to drive growth and profitability in a capital efficient manner
  • Founder-led company with a strong professional management Skilled and experienced management team

Honasa Consumer Limited – Financial Insights

Financial Year ending / Period ending (Amt in Crores)
Period Ended 31-Mar-21 31-Mar-22 31-Mar-23 30-Jun-23
Assets 302.64 1,035.01 966.42 1,048.03
Revenue 472.10 964.35 1,515.27 477.10
Profit After Tax -1,324.61 14.44 -150.97 24.72
Net Worth -1,765.14 705.62 605.90 638.26
Reserves and Surplus -1,087.33 -1,323.32 -1,290.94
Total Borrowing 3.59 3.61 6.79

Objects of the IPO

The IPO IPO size is Rs 1,701 Crores which comprises OFS (Offer for Sale) and fresh issue.

#1 – OFS of Rs 1,336 Crores – Under OFS, the money would go to selling shareholders and company would not get anything.

#2 – Fresh issue of Rs 365 Crores – This would be used for the following:

  • Advertisement expenses towards enhancing the awareness and visibility of the company’s brands;
  • Capital expenditure to be incurred by the Company for setting up new EBOs;
  • Investment in the company’s Subsidiary, Bhabani Blunt Hairdressing Private Limited (“BBlunt”) for setting up new salons; and
  • General corporate purposes and unidentified inorganic acquisition.

Mamaearth IPO Price Valuation

  • Its IPO price band is Rs 308 to 324 per share
  • Last year FY23 EPS is negative, hence we cannot compute P/E Ratio based on this.
  • Last 3 years weighted average EPS is negative, hence we cannot compute P/E Ratio even based on this.
  • If we consider 3 months ended Jun-23 EPS and annualize it, P/E works out to be 97x.
  • The listed peers like Procter & Gamble trading at P/E 83x (Highest) and Bajaj Consumer Care is trading at P/E of 25x (Lowest) and industry average P/E is 54x. While it may not be appropriate to consider only Jun-23 qtr revenue EPS and compare it, but considering it, the IPO is over priced.

Positive Factors in Mamaearth IPO

  • Company has good brand building capabilities, repeatable playbooks and consumer-centric product innovation
  • Strong revenue growth in the last 3 years

Negative or Risk Factors in this IPO

  • Company has been incurring losses in the past. For Qtr ending Jun-23, it generated profits. There is no guarantee that it would generate profits in future.
  • Majority of the IPO issue has OFS. Under OFS, the money would go to selling shareholders, and the company would not benefit.
  • The IPO price is over priced.
  • Failure to identify and effectively respond to changing consumer preferences and spending patterns or changing beauty and personal care trends in a timely manner, may adversely affect the demand for its products, causing its business, results of operations, financial condition and cash flows.
  • Its brands and reputation are critical to the success of its business and may be adversely affected due to various reasons, which could have an adverse effect on its business, financial condition, cash flows and results of operations.
  • The launch of new brands or products that prove to be unsuccessful could affect its growth plans which could adversely affect its business, financial condition, cash flows and results of operations.
  • They do not manufacture any of its products and rely entirely on third-party manufacturers for the manufacturing of all its products. Its dependence on third-party manufacturers for the manufacturing of all its products subjects to risks, which, if realized, could adversely affect its business, results of operations, cash flows and financial condition
  • They derive a significant amount of revenue from a limited number of products. Any decrease in the sales of its key products will adversely affect its business, cash flows, financial condition and results of operations.
  • The substantial majority of its revenue from operations comes from the sale of products under its flagship Mamaearth brand. Any decrease in demand for its Mamaearth branded products could have an adverse effect on its business, cash flows and results of operations.
  • Investors should read both internal and external risk factors indicated in the RHP.

Mamaearth IPO GMP (Grey Market Premium)

There are no offline trades happening for this script. GMP is nothing but the premium at which these shares are trading in offline market.

Mamaearth IPO Review – Should you invest or avoid?

After reading the pros and cons, you might be wondering whether you should subscribe to this IPO or not.

This IPO has several positive aspects, such as a well-established brand name and strong revenue growth.

However, on the negative side, company has been incurring losses in the past. Its IPO price is also very high. Beyond this majority of the IPO proceeds is OFS which would go for selling share holders. Investors can also go through all internal and external risk factors and more details about the company at Mamaearth IPO RHP.

While some stock market veterans like Dilip Davda asking to subscribe to this IPO, personally I am staying away from this IPO.

Suresh KP

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