Honasa Consumer, the parent company of Mamaearth, is planning to raise ₹1,701 crore through its initial public offering (IPO). The IPO will be open for subscription from October 31 to November 4. The price band for the issue has been set at ₹308-324 per share.
The IPO will consist of a combination of a fresh issue and an offer-for-sale. Celebrities, including Shilpa Shetty, as well as investors from Snapdeal and Marico family, will be selling their shares. Other shareholders include Varun and Ghazal Alagh, Fireside Ventures Fund, Sofina, and Stellaris. The net proceeds from the fresh issue will be used for advertisement expenses, setting up exclusive brand outlets, investment in subsidiary BBlunt, general corporate purposes, and unidentified inorganic acquisitions.
Retail investors will be allocated 10% of the offer, non-institutional investors will receive 15%, while qualified institutional buyers (QIBs) will be allocated 75% of the offer. The book running lead managers for the IPO are Kotak Mahindra Capital, Citigroup Global, J M Financial, and J P Morgan, with KFIn serving as the registrar.
However, Honasa Consumer reported losses in FY23 due to an impairment loss of ₹154 crore. The loss was primarily caused the decision to scale down the business verticals of Momspresso, a subsidiary acquired in December 2021.
In terms of revenue, Honasa Consumer has shown progressive growth over the past three years. However, most of its revenues depend on its top 10 products, including Mamaearth, Derma Co, Dr Sheth’s, and Aqualogica brands. The company acknowledges that a decrease in the sales of these products could adversely affect their business.
The company also relies on influencers for marketing its products, which poses a potential risk as influencers can negatively impact the company’s reputation. While the company sells its products through various channels, including its own D2C channel and third-party e-commerce marketplaces, the majority of its revenue comes from e-commerce platforms.
One of the challenges the company faces is high advertising expenses, accounting for 34.99% of its revenue from operations. Additionally, the company operates in a highly competitive market with larger competitors who have more resources for advertising and marketing. The company is also concerned about the threat of new entrants and the potential impact on pricing.
Furthermore, the company’s subsidiaries, including Just4Kids, BBlunt, B:Blunt Spratt, and Fusion, have incurred losses in the past, and there is no guarantee of their profitability in the future. The company is also involved in several legal proceedings, including criminal and civil cases.
Overall, Honasa Consumer’s IPO aims to raise significant funds for its expansion plans and address potential risks and challenges it faces in the highly competitive personal care products market.