Home/Article/Deep Dive into the Honasa Consumer Ltd IPO: A Complete Overview

Deep Dive into the Honasa Consumer Ltd IPO: A Complete Overview

18 Oct 2023

One of the most anticipated public issues in recent times is that of Honasa Consumer Limited, which is the company that owns the popular consumer brand, Mamaearth. Ever since the entity filed the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI), there’s been a lot of buzz in the Indian stock market. 

So what is the reason behind such animated chatter and is the upcoming IPO worth investing in? Here’s everything you need to know about the public issue of Honasa Consumer Limited. 

Company Overview

Before we look at some of the details of the IPO, let’s first try to get to know the company and its business. 

Honasa Consumer Limited was incorporated as recently as 2016. However, in just a matter of a few years, the company has managed to become the largest digital-first personal and beauty care brand in the country. In terms of operating revenue for FY22, the company was firmly at the top spot, clearly beating out bigger rivals. 

The company possesses multiple brands under its belt, with the premier and flagship brand being Mamaearth. Mamaearth, as a brand, develops multiple products under different segments. One of the highlights of Mamaearth is that all of its products are made using natural ingredients, are free from toxins, and are completely safe to use. 

While Mamaearth was a brand built from scratch, Honasa Consumer Limited, to strengthen its position in the market, has also acquired other major brands. This includes major names such as Ayuga, Aqualogica, BBlunt, Dr. Sheth’s, and The Derma Co. Through these acquisitions, the company has managed to build a ‘House of Brands’.  

As of September 30, 2022, Honasa Consumer Limited’s portfolio consists of brands catering to segments such as beauty, hair care, face care, body care, makeup, fragrances, baby care, and more.

Company Financials

Now that you’ve become more familiar with the company, let’s take a brief look at some of the key financial metrics for the previous three financial years - FY20, FY21, and FY22. 

(figures are in ₹ crores)

Particulars

As of September 30, 2022 FY22 FY21 FY20
Equity Share Capital 136 0.013 0.013 0.013
Net Worth 728 706 -1,765 -437
Total Borrowings 7 3.5 1,954 593
Operating Revenue 723 943 460 109
Restated Profit / (Loss) 4 14 -1,332 -428
Diluted Earnings Per Share (EPS) 0.25 0.52 -98 -32
Return on Net Worth (RoNW) 1.06% 2% - -
Net Asset Value (NAV) per equity share 23 23 -62 -15

Note: Except for the Diluted EPS and NAV per equity share, all other figures are expressed in ₹ crores. 

Key Strengths of the Company 

As per the Draft Red Herring Prospectus filed by Honasa Consumer Limited, the key strengths of the company are as follows. 

  • Ability to build strong brands
  • Highly repeatable sales playbooks
  • A customer-centric approach to product innovation 
  • Strong omni-channel distribution system with a focus on being digital-first
  • Contextualized marketing driven by data analytics
  • Highly professional management team led by founders 
  • Ability to achieve growth and profitability while being capital-efficient 

Key Risks for the Company 

The DRHP of the upcoming IPO of Honasa Consumer Limited has also outlined some of the key risks that the company faces. Here’s a quick look at what they are. 

  • Changing preferences and spending patterns of consumers
  • Changing personal care and beauty trends
  • Brand reputations getting hit due to liability claims or recalls 
  • New brand launches proving to be unsuccessful 
  • Revenue generation is limited to just a handful of products and brands
  • Overdependence on third-party manufacturers 
  • Intense competition from rivals 

Details of the IPO

Since the company is yet to submit the final Red Herring Prospectus (RHP) with the SEBI, many details of the IPO such as the date of opening and closing of the issue, the pricing of the issue, and the total offer size are unavailable to the public. That said, some of the key information regarding the IPO has been made public through the DRHP. Let’s check out what they are. 

Firstly, the public issue of the company consists of two components - a fresh issue of equity shares and an Offer for Sale (OFS) from the promoters and investors of the company. Through the fresh issue of the equity shares, the company is planning to raise around Rs. 400 crores, which it will use to satisfy the objects of the offer as explained below. 

Through the OFS component of the public issue, on the other hand, the investors and promoters of Honasa Consumer Limited are planning to offload as many as 4,68,19,635 (4.68 crores) equity shares. 

That’s not all. Out of the entire issue, around 75% has been reserved for Qualified Institutional Buyers (QIBs) and around 15% for Non-Institutional Buyers (NIBs). The remaining 10% of the issue has been reserved exclusively for retail investors. 

Objects of the Offer

As per the DRHP filed by the company, the net proceeds that it receives from the fresh issue of equity shares will be used for fulfilling the following objectives. 

  • For marketing and advertising the company’s various brands and products to create awareness and enhance visibility. 
  • For setting up Exclusive Brand Outlets (EBOs).
  • For setting up new salons under the BBlunt (Bhabani Blunt Hairdressing Private Limited) brand.
  • For unidentified inorganic acquisitions in the future.
  • For other general corporate purposes.

Conclusion

If the response for other similar IPOs from the beauty and personal care industry is anything to go by, the upcoming IPO of Honasa Consumer Limited is likely to be received positively. That said, the public response ultimately depends on the IPO price band that the company chooses to set. 

At first glance, the company’s target valuation of $3 billion seems very high compared to that of its rivals. However, we might get more clarity as more information regarding the IPO is revealed in the future via statutory filings made by the company in the form of the Red Herring Prospectus. 

If you’re interested in investing in the public issue of Honasa Consumer Limited, it is a good idea to first set up your very own trading and demat account. Visit the website of Motilal Oswal to open a demat account and a trading account for free through a paperless and digital process. Once you have your account up and running, you will be able to apply for the upcoming IPO without any issues. 

 

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