Mamaearth IPO: Parent firm Honasa debuts at 2% premium at ₹330 on NSE
Honasa Consumer, the parent of popular skincare brand Mamaearth, made a muted debut on Dalal Street, with its shares listing marginally above its issue price of ₹324 on Tuesday. Shares of Honasa Consumer, co-founded by the husband-wife duo of Varun and Ghazal Alagh, debuted on the National Stock Exchange (NSE) at ₹330, a premium of 1.85% over the issue price, and on the Bombay Stock Exchange (BSE) at ₹324 apiece, equal to the IPO issue price.
Post listing, Honasa shares rose as much as 4.2% to ₹337.6 on the NSE, while it hit a high of ₹337 on the BSE. The market capitalisation stood at ₹10,400.5 crore at the time of reporting.
The listing of Mamaearth’s parent was below market expectations as the shares of beauty and personal care company were commanding a grey market premium (GMP) of ₹24 today, indicating the listing price to be around ₹348 (cap price + today's GMP), a premium of 7.4% over the issue price.
“After receiving a decent subscription, Honasa stock was able to give a positive listing. Investors are now suggested to book profit and exit their position,” says Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.
“While Honasa Consumer is still a relatively young company, it has quickly grown to become a major player in the Indian beauty and personal care (BPC) market. The company has a diverse product portfolio that includes face care, baby care, hair care, body care, color cosmetics, and fragrances. However, the financial condition of the company is facing some turbulence, and there are other operation-related risks as well,” she adds.
The ₹1,701 crore IPO of Mamaearth, consisting an offer for sale (OFS) of 4.12 crore shares and fresh issue of shares worth ₹365 crore, opened for subscription between October 31 and November 2. The public offer received subdued response from investors in the first two days of bidding, subscribing merely by 13% on day 1, followed by 70% bidding on the second day. However, the IPO of the fast-growing D2C (direct-to-consumer) company gained momentum on the final day, subscribing 7.5 times on the back of aggressive bidding by employees and qualified institutional buyers (QIBs).
As per the BSE data, the issue received bids for 21.82 crore shares against 2.88 crore shares on offer, led by QIBs as the quota reserved for them was booked 11.5% times. This was followed by non-institutional investors (NIIs) as the portion set aside for them was subscribed 3.94 times. The quota for retail investors received 1.15 times bidding, while employees portion was booked 4.6 times.
Honasa had reserved 10% of the issue for retail investors, up to 15% for NIIs, and up to 75% for QIBs. The company had offered a 30% discount per equity share to eligible employees bidding in the IPO.
Honasa intends to use the capital raised through net proceeds from the fresh issue towards advertisement and capital expenses, investment in its subsidiary, and meet general corporate purposes. Of the ₹365 crore raised from fresh issue, it proposes to invest ₹186 crore to meet advertisement expenses towards enhancing the awareness and visibility of its brands; ₹34.23 crore to incur capital expenditure for setting up new EBOs; and ₹27.52 crore for investment in its subsidiary, Bhabani Blunt Hairdressing for setting up new salons. A part of the fund will be also used to meet general corporate purposes and unidentified inorganic acquisitions.
Ahead of the public offering, Honasa raised ₹765.20 crore from anchor investors on October 30, 2023. It allotted 2.36 equity shares to 49 anchor investors at the upper price band, which saw participation from foreign as well as domestic investors, with foreign portfolio investors (FPIs) allocated nearly 54.7% of anchor allocation, and the remaining to domestic investors.
Founded in 2016, Honasa Consumer is the largest digital-first beauty and personal care (BPC) company in India in terms of revenue from operations for the financial year 2023, as per RedSeer report. Since launching flagship toxin-free skincare brand Mamaearth in 2016, Honasa has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s, and has built a ‘House of Brands’ architecture. As of September 30, 2022, Honasa Consumer portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, colour cosmetics, and fragrances segments.
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