Mamaearth aims to raise Rs 1,701 crore via its maiden public issue; Should you subscribe on Day 2?
Mamaearth IPO Subscription Day 2: Honasa Consumer, parent company behind beauty and personal care brand Mamaearth, aims to raise Rs 1,701 crore via its maiden public issue. It saw a tepid response on day 1 of the subscription. The IPO comprises a fresh issue of equity shares worth Rs 365 crore and an offer for sale (OFS) component of 4.12 crore equity shares by promoters, investors, and other selling shareholders.
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Honasa Consumer has mopped up Rs 765.2 crore from 49 anchor investors on October 30, the day before issue opening.
Mamaearth IPO: Subscription
Mamaearth IPO has received bids for 36,17,256 shares against 2,88,99,514 shares on offer, according to data from the BSE on Day 1.
Mamaearth IPO retail investors’ portion received bids for 17,74,450 shares against 52,48,272 shares on offer for this segment.
Mamaearth IPO’s non-institutional investors’ portion received bids for 2,32,300 shares against 78,72,409 on offer for this segment.
Mamaearth IPO’s Qualified Institutional Buyers (QIBs) portion received bids for 15,43,254 shares against 1,57,44,820 shares on offer for this segment.
Mamaearth IPO’s employee portion received bids for 67,252 shares against 34,013 on offer for this segment.
Mamaearth IPO: Price Band
The price band for the offer has been fixed at Rs 308-324 per share
Mamaearth IPO: Lot Size
The Mamaearth IPO lot size is 46 equity shares and in multiples of 46 equity shares thereafter.
Mamaearth IPO has reserved not less than 75 per cent of the shares in the public issue for qualified institutional buyers (QIB), not more than 15 per cent for non-institutional investors (NII), and not more than 10 per cent of the offer is reserved for Retail Investors.
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A discount of Rs 30 per equity share is being offered to eligible employees bidding in the employee reserve portion.
Mamaearth IPO: Promoters
Those offering shares in the OFS include promoters and founders — Varun Alagh and Ghazal Alagh — and investors like Fireside Ventures Fund, Sofina, Stellaris, Kunal Bahl, Rohit Kumar Bansal, Rishabh Harsh Mariwala and Bollywood actor Shilpa Shetty Kundra.
Promoters including Varun Alagh and Ghazal Alagh hold 37.41 percent stake in Honasa, and the rest of shareholding is owned by public including Peak XV Partners, Fireside Ventures Fund, Stellaris and Sofina.
Mamaearth IPO: Objective
Proceeds from the fresh issue would be utilised towards advertising expenses to improve awareness and brand visibility, setting up new exclusive brand outlets, investment in its subsidiary BBlunt for setting up new salons, general corporate purposes, and inorganic acquisition.
Mamaearth IPO: About the Company
The Gurugram-based beauty and personal care company was founded in 2016 by husband-wife duo Varun and Ghazal Alagh. It began with the launch of Mamaearth and over the years added five more brands to its portfolio, including The Derma Co, Aqualogica, Ayuga, BBlunt, and Dr Sheth’s, and built a ‘House of Brands’ architecture.
In January 2022, the company entered the unicorn club. Kotak Mahindra Capital Company, Citigroup Global Markets India, JM Financial and JP Morgan India Pvt Ltd are the book-running lead managers to the issue. The equity shares of the company will be listed on the BSE and NSE.
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Mamaearth IPO: Share Allotment & Listing
The Sequoia Capital-backed firm will finalise the basis of allotment of IPO shares by the end of November 7. Equity shares will be credited to demat accounts of successful investors by November 9.
The trading in its equity shares will commence on the BSE and NSE, with effect from November 10, as per the IPO schedule.
Mamaearth IPO: GMP
The equity shares seem to be getting muted response in the grey market, trading at around 2-3 percent premium over the upper price band, analysts on anonymity said. The grey market is an unofficial platform for trading in IPO shares till the listing.
Mamaearth IPO: Whether To Buy or Not
Giving ‘subscribe’ tag to the IPO, Emkay Global said, “We assess the stock’s valuation for three scenarios (considering the upper-end of the band): i) Attractive (EV/sales of 3.5x and EV/EBITDA of 29x for FY26E), if Company doubles revenue in three years and improves OPM to ~12%; ii) Fair (EV/sales of 4.2x and EV/EBITDA of 41.7x for FY26E), if Company sees revenue CAGR of 20% with OPM of 10%; and iii) Expensive (EV/sales of 5.2x and EV/EBITDA of 87x for FY26E), if Company registers revenue CAGR of ~10% and maintains margin at ~6%).”
Swastika Investmart Limited analyst said: “The financial performance of the company has been inconsistent, and it has reported losses in recent fiscals. Subsidiaries that it has acquired have also incurred losses. Additionally, the company does not manufacture its products and relies on third parties for that, and it also does not hold any patents over its product formulas.”
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“The business’ return on advertising has also been consistent for a few years, i.e., 2.5%, thus the company’s client retention is very low. As it is a loss-making company, we cannot derive its actual P/E, but even after considering its outflow in the latest investment, the company is coming at an extremely high valuation. Thus, I will suggest to Avoid this IPO,” the analyst said.
