Mamaearth’s parent company, Honasa Consumer, received a lackluster response from institutional investors during its public issue. However, it managed to raise a substantial amount of ₹765 crore from anchor investors before its IPO. The company plans to utilize the net proceeds from the offering for advertising expenses, establishing its brand, investing in subsidiaries, and other purposes.
By the end of the first day of the issue, Honasa Consumer’s ₹1,701 crore IPO had only been subscribed to 12%. This tepid response extended to all classes of investors, with qualified institutional buyers (QIBs) and non-institutional investors showing minimal interest. Retail investors accounted for 30% of the bids received as of Tuesday. The allocation for the IPO is 10% for retail investors, 15% for non-institutional investors, and 75% for QIBs. The IPO will close on November 4, with a price band set at ₹308-324. Investors are required to bid for a minimum of 46 shares in multiples thereof.
Prior to the IPO, the company successfully raised ₹765 crore from anchor investors, including Abu Dhabi Investment Authority (ADIA) and Goldman Sachs Singapore. This strong investor interest indicates confidence in the company’s prospects.
An acid test awaits Direct-to-Consumer (D2C) brands like Honasa Consumer. The company is a conglomerate in the beauty and personal care industry and has incubated successful brands like Mamaearth. It has also grown through strategic acquisitions, including BBlunt salons. In its portfolio, Honasa Consumer boasts brands such as The Derma Co, Dr Sheth’s, Aqualogica, and Ayuda.
The funds raised through the IPO will be used for advertising expenses, establishing exclusive brand outlets, investing in the subsidiary BBlunt, general corporate purposes, and potential acquisitions. Despite posting profits in FY22, the company incurred losses in FY23 due to an impairment loss of ₹154 crore. This was primarily a result of the decision to scale down certain business verticals of Momspresso, a content platform acquired Honasa Consumer in December 2021.
With ad expenses accounting for 34.99% of its revenue as of June, the company faces stiff competition in its highly competitive segment. Larger competitors with greater resources have the advantage of spending more on advertising, marketing, and offering significant discounts, which poses a risk for Honasa Consumer.
However, the company has shown impressive growth, with a revenue CAGR of 80% over FY21-23 and a volume growth of 102.28%. It boasts an adjusted EBITDA of 3.4% as of FY23 and benefits from a negative working capital due to its asset-light model, allowing for increased investments in marketing, technology, and product innovation.
In conclusion, Mamaearth’s parent company, Honasa Consumer, received a tepid response from institutional investors during its public issue. However, the company successfully raised ₹765 crore from anchor investors and has ambitious plans for utilizing the net proceeds from the IPO. Despite facing challenges in a competitive market, Honasa Consumer has experienced impressive growth and is positioned for long-term success according to industry reports.