Mamaearth’s parent company, Honasa Consumer, is planning to raise a significant amount of ₹1,701 crore through its initial public offering (IPO). The IPO is set to open on October 31 and close on November 4. The price band for the issue has been fixed at ₹308-324.
Investors participating in the IPO can bid for a minimum of 46 shares in multiples thereof. The offering is a combination of a fresh issue and an offer-for-sale. Prominent selling shareholders include celebrity investor and actress Shilpa Shetty, Snapdeal’s Rohit Kumar Bansal and Kunal Bahl, Rishabh Harsh Mariwala of the Marico family, as well as other stakeholders such as Fireside Ventures Fund, Sofina, and Stellaris.
Honasa Consumer plans to utilize the net proceeds from the IPO for advertising expenses, setting up exclusive brand outlets, investments in its subsidiary BBlunt, general corporate purposes, and unidentified inorganic acquisitions. The retail investors will be allocated 10% of the offering, non-institutional investors will receive 15%, and qualified institutional buyers (QIBs) will be allotted 75%.
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.
In their financial report, Honasa Consumer revealed a progressive growth in revenue over the past three years. However, they incurred losses in FY23, primarily due to an impairment loss of ₹154 crore. This loss was a result of the majority downscaling of Momspresso, a subsidiary content platform acquired in December 2021.
The company heavily relies on its top 10 products, with roughly 29% of revenues coming from these products. The Mamaearth brand, the Derma Co, Dr Sheth’s, and Aqualogica brands are among their top-performing products. Additionally, the company has noted the potential risks associated with influencers, as they may negatively impact their brands. The majority of sales are generated through third-party e-commerce marketplaces, accounting for 64% of revenue from operations.
Honasa Consumer faces challenges in its high advertising expenses and intense competition within the beauty and personal care products market. Larger competitors with greater resources may outspend them on advertising and marketing, offering significant discounts. The company also anticipates potential increased competition from new entrants, which could lead to intensified pricing competition.
Moreover, Honasa Consumer has experienced losses with its subsidiaries acquired in the past, and there is no guarantee of future profitability. The company is currently involved in several legal proceedings, including one criminal case and three material civil proceedings, as well as two tax and two material civil litigations with an aggregate amount of ₹100 crore.
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