Honasa Consumer IPO Review: The much awaited IPO is set to hit the markets. Honasa Consumer which owns the flagship brand- Mamaearth, is coming up with the IPO which is set to be listed on the NSE and BSE. The IPO will be open for subscription on 31st October 2023 and closes on 2nd November 2023.
In this Honasa Consumer IPO review, which owns the brand- Mamaearth, we look at their scale of operations, GMP, strengths, weaknesses & more. Keep reading for more details!
Honasa Consumer IPO Review – About The Company
Honasa Ltd. is India’s leading digital-first beauty and personal care company, founded in 2016. It offers a range of natural safe and toxin-free products through its six House of Brands: Mamaearth, The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s. Each brand caters to different segments of customers with unique needs and preferences. Mamaearth is the flagship brand that focuses on natural and safe products for mothers and babies. The other brands provide solutions for skin care, hair care, wellness and grooming.
Honasa Ltd. has a strong online presence, with 59.36% of its revenue coming from online channels. It also has a wide offline distribution network, with 36.14% of its revenue from offline channels and 4.50% from other services.
The company has 13 warehouses across India, covering 18,640 pin codes and 85 exclusive brand outlets for Mamaearth products.
The beauty and personal care (BPC) industry in India encompasses the products and services that enhance the appearance and well-being of a person’s hair, skin, and nails. The industry is witnessing a rapid transformation due to the convergence of technology, demographic changes, and rising consumer aspirations. The Indian BPC market is expected to grow from around $20 billion in 2022 to around $33 billion in 2027, registering a CAGR of about 11%, which is among the highest in the retail sector.
The market is driven by the increasing awareness and demand for natural, organic, and diversified products, as well as the growing penetration of e-commerce platforms.
The online BPC market, which accounted for 16% of the total market in 2022, is projected to grow at a CAGR of 29% to reach 34% by 2027. The offline BPC market, which includes unorganized and organized channels such as general trade, modern trade, and salons, still dominates the market with an 84% share in 2022.
The offline channel is preferred by consumers who seek to touch and feel the products, especially for mid-premium and premium segments. The BPC industry in India caters to the evolving needs and preferences of the large and growing young population, who are influenced by global beauty trends and social media platforms.
Honasa Consumer IPO – Financial Highlights
Honasa Consumer has seen a substantial increase in operational revenue, soaring from ₹459 crore in March 2021 to ₹1492 crore in March 2023. However, the company has been incurring losses, with Profit After Tax (PAT) declining from -₹1,332 crore to -₹150 crore. The net worth of the company also decreased from ₹705 crore in 2022 to ₹605 crore in 2023.
In the latest quarter, the company reported a revenue of ₹464 crore and a profit of ₹2.4 crore. The company’s borrowing remained relatively stable, moving from around ₹3.5 Crore in 2022 to ₹3.6 Cr in 2023.
(Source: RHP of the company)
Competitors of the company
While there are no companies of comparable size in the same industry as Honasa Consumer, in India. But It does face competition from larger, established companies in the fast-moving consumer goods space.
These competitors, with their varied business models and offerings, include Hindustan Unilever Limited, Colgate Palmolive (India) Limited, Procter & Gamble Hygiene and Health Care Limited, Dabur India Limited, Marico Limited, Emami Limited, Bajaj Consumer Care Limited, and Godrej Consumer Products Limited.
Strengths of the company
- Consumer-Centric Approach: Honasa Consumer prioritizes its customers in all aspects, from innovation to marketing. It strategically utilizes online channels, including Direct-to-Consumer platforms and e-commerce marketplaces, to reach over 5,000 stores.
- Diversified Portfolio: The company boasts a wide range of products catering to various needs and preferences. Its portfolio includes baby care, face care, body care, hair care, cosmetics, and fragrances.
- Influencer Marketing: In 2023, Honasa Consumer collaborated with 4025 influencers and 4 celebrities from various fields such as beauty, fashion, and lifestyle. This strategy has significantly increased brand awareness.
- Product Innovation: The company launched 5.7 times more new products/SKUs than the Beauty and Personal Care industry median in the Financial Year 2023. This ability to introduce new innovations is crucial to their success.
Weaknesses of the company
- High Advertisement Expenses: The company spends 35% of its revenue on advertising due to its aggressive marketing strategy. There’s no guarantee that reducing these expenses would maintain the current revenue growth.
- Dependence on Third-Party Services: Honasa Consumers outsources the management of 10 out of its 13 warehouses and relies entirely on third-party manufacturers for product production. Any changes in acquisition costs could affect profit margins and product prices.
- Volatile Market: The beauty and personal care market is subject to frequent changes in consumer preferences and product variations. Unpredictable shifts in preferences or new competitor products could put the company’s products at a disadvantage.
- Over-reliance on a Single Brand: A significant 81% of the company’s revenue comes from the sale of products under their flagship Mamaearth brand. Any decrease in demand for these products could adversely affect their business.
Honasa Consumer IPO Review – GMP
As of October 30th October 2023, The IPO for Honasa Consumer is set at a price band of ₹308-₹324 per share. The latest grey market price stands at ₹7. The IPO is projected to list at a premium of 2.16%, with an estimated listing price of ₹331.
Key IPO Information
|Fresh Issue||₹365 Cr|
|Offer for sale||₹1336 Cr|
|opening date||31th october 2023|
|closing date||2nd November 2023|
|face value||₹10 per share|
|price band||₹308 to ₹324 per share|
|lot size||46 shares|
|Minimum lot||1 (46 shares)|
|maximum lot||13 (598 shares)|
|listing date||10th November 2023|
Promoters: Varun Alagh and Ghazal Alagh are the promoters of the company.
Book Running Lead Manager: Kotak Mahindra capital company limited, Citigroup global markets India private limited, JM financials limited, JP Morgan India private limited.
Registrar to the Offer: Kfin Technologies Limited
The Objective of the Issue
The company proposes to utilize the Net Proceeds towards funding the following objects:
- Advertisement expenses towards enhancing the awareness and visibility of the company’s brands;
- Capital expenditure to be incurred by the Company for setting up new EBOs;
- Investment in the company’s Subsidiary, Bhabani Blunt Hairdressing Private Limited (“BBlunt”) for setting up new salons; and
- General corporate purposes and unidentified inorganic acquisition.
Honasa Consumer, spearheaded by its flagship brand Mamaearth, has swiftly carved out a significant niche in the dynamic beauty and personal care (BPC) market in India.
Despite enduring losses due to aggressive marketing strategies and acquisitions aimed at expanding its market share, the company continues to prioritize innovation, distribution, and marketing. Committed to meeting the evolving needs of the increasingly discerning Indian millennials, Honasa Consumer plans to persistently introduce new products in the market.
What do think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written By Niharika Jadhav
By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.
Start Your Stock Market Journey Today!
Want to learn Stock Market trading and Investing? Make sure to check out exclusive Stock Market courses by FinGrad, the learning initiative by Trade Brains. You can enroll in FREE courses and webinars available on FinGrad today and get ahead in your trading career. Join now!!