Mamaearth parent Honasa Consumer IPO subscribed nearly 7.6 times

Mamaearth parent Honasa Consumer's initial public offering (IPO) garnered nearly eight times more demand than the 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. The high net-worth individual and retail portions garnered four times and 1.4 times subscription, respectively.

The encouraging response for the issue came despite concerns over Honasa's valuation and profitability track record. At the top-end of the price band of Rs 308-324 per share, the company was valued at Rs 10,500 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 the previous year.

It had reported a net loss of Rs 151 crore in FY23. The company's Rs 1,700-crore IPO consisted of Rs 375 crore fresh fund raise to be used for advertisement spends and store expansion. The remaining amount was a secondary share sale by founders Varun Alagh and Ghazal Alagh, private equity investors Fireside Ventures Fund, Sofina, and actor Shilpa Shetty Kundra.

“We assess the stock's valuation for three scenarios: Attractive (EV/sales of 3.5x and EV/EBITDA of 29x for FY26E), if the company doubles revenue in three years and improves operating profit margin (OPM) to 12 per cent; Fair (EV/sales of 4.2x and EV/EBITDA of 41.7x 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 5.2x and EV/EBITDA of 87x for FY26E), if the company registers revenue CAGR of 10 per cent and maintains OPM at 6 per cent,” Emkay Global had said in a note.

Besides the flagship Mamaearth brand, Honasa also owns brands such as Aqualogica, The Derma Co, Dr Sheth’s, and BBlunt.