Mamaearth parent Honasa’s ₹1,701 crore IPO to launch on October 31

Honasa Consumer Ltd., the parent company of D2C upstart Mamaearth, has officially announced its initial public offering (IPO). The startup is expecting to raise a substantial ₹1,701 crore on the upper-price band of the IPO. It is expecting a rather steep ₹10,424 crore IPO valuation.

The IPO is priced in the range of ₹308 to ₹324 per share, with each share having a face value of ₹10. The offering opens to investors on October 31, 2023, and will close on November 2, 2023. During this period, investors can bid for a minimum of 46 equity shares, with the option to bid in multiples of 46 shares thereafter. Media reports state that it comprises two components: a fresh issue and an offer for sale (OFS).

“We intend to continuously strive to gain market share in our existing categories by driving innovations across new ingredients, new propositions, and new product formats. The future of BPC products lies not only with large platform brands, but also unique propositions and categories which cater to specific consumer need spaces.” Ghazal Alagh, Wholetime Director & Chief Innovation Officer of Honasa, commented. The fresh issue aims to raise funds amounting to ₹365 crore. Simultaneously, the OFS offers up to 41,248,162 equity shares from selling shareholders. These selling shareholders include the company’s promoters and founders, Varun Alagh and Ghazal Alagh, as well as notable investors such as Fireside Ventures Fund, Sofina, Stellaris, Kunal Bahl, Rohit Kumar Bansal, Rishabh Harsh Mariwala, and Shilpa Shetty Kundra.

“While we continue growing our business, we are focused on driving profitable unit economics. This has translated into an efficient business model and we were ranked third amongst digital-first BPC [Beauty & Personal Care] companies in India in terms of gross profit margins in financial year 2022. As our business scales, we intend to proactively work towards deriving further benefits of economies of scale across all aspects of our business model, including procurement and manufacturing, supply chain and distribution, advertising and promotional expenses, and operating expenses,” Varun Alagh, Chairman and CEO of Honasa, said.

While many in the startup sector are hoping for the IPO to be a landmark moment, expected to buzz-up the largely subdued 2023 startup investment scene, experts believe the valuation Honasa is asking for, is quite steep. For a company that reported a net profit of ₹24.71 crore in last FY, it is asking for a ₹10,424 crore market cap on the upper band of that IPO. Looking at market sentiments and how even private investors have shown caution when it comes to Indian high-value startups, expect the IPO response to be subdued, at least initially.

The company is aiming to use the proceeds from the fresh issue for advertising expenses to step up awareness and brand visibility, establishing new exclusive brand outlets, investment in its subsidiary BBlunt for setting up new salons, general corporate purposes, and inorganic acquisition.

Notably, the company had encountered a net loss of ₹151 crore in the entire fiscal year 2023, while its revenue from operations grew at a CAGR of 80.14% during FY21-FY23 to reach ₹1,492.75 crore in FY23.