Honasa Consumer IPO gains 4% on market debut, value hits Rs 10,850 cr

Shares of Honasa Consumer rose 4 per cent during their stock market debut on Tuesday. After hitting a low of Rs 321 and a high of Rs 340, the stock ended at Rs 337, up Rs 13, or 4 per cent, over the issue price of Rs 324 on the National Stock Exchange (NSE), where shares worth nearly Rs 1,000 crore were traded. Honasa also owns popular brands such as Mamaearth, Aqualogica, The Derma Co, Dr Sheth’s and BBlunt.

The company’s initial public offering (IPO), which closed on Thursday, had garnered nearly eight times more demand than shares on offer, thanks to strong demand from institutional investors. The qualified institutional buyer portion of the issue was subscribed 11.5 times, with over 80 per cent of the bids coming from overseas investors.

Many on the Street had raised concerns over Honasa’s valuation and profitability track record.

At last close, the company was valued at Rs 10,850 crore. For the quarter ended June 2024, Honasa had reported a net profit of Rs 24.7 crore, as against a loss of Rs 11.5 crore during the same quarter of last year. It had reported a net loss of Rs 151 crore in the financial year 2023.

“We assess the stock’s valuation for three scenarios: Attractive (enterprise value [EV]/sales of 3.5 times and EV/earnings before interest, taxes, depreciation, and amortisation [Ebitda] of 29 times for the financial year 2026 estimate [FY26E]), if the company doubles revenue in three years and improves operating profit margin (OPM) to 12 per cent; Fair (EV/sales of 4.2 times and EV/Ebitda of 41.7 times for FY26E), if the company sees revenue compound annual growth rate (CAGR) of 20 per cent with OPM of 10 per cent; and Expensive (EV/sales of 5.2 times and EV/Ebitda of 87 times for FY26E), if the company registers revenue CAGR of 10 per cent and maintains OPM at 6 per cent,” Emkay Global had said in its IPO note.

The company’s Rs 1,700-crore IPO consisted of Rs 375 crore fresh fundraise to be used for advertisement spends and store expansion. The remaining was a secondary share sale by founders Varun Alagh and Ghazal Alagh, private equity investors Fireside Ventures Fund, Sofina and actor Shilpa Shetty Kundra.