At 2:20 PM, the issue has been subscribed to 5.6 times (5.6x), with the QIB component having been subscribed to 9.4x and the Employee portion having been subscribed to 4.34x. The proportion of retail investors was 91%.
Honasa Consumer’s initial public offering (IPO) went ahead without a hitch on the last day, thanks to robust purchasing demand from qualified institutional investors (QIBs).
At 2:20 PM, the issue has been subscribed to 5.6 times (5.6x), with the QIB component having been subscribed to 9.4x and the Employee portion having been subscribed to 4.34x. Non-institutional investors (NIIs) received 100% of the allocation, while individual investors received 91%.
The IPO of the Beauty and Personal Care (BPC) e-retailer began on October 31 with a price band of Rs 308 to Rs 324. The business intends to raise Rs 10,400 crore at the top end of the pricing range.
The company’s grey market premium (GMP) has been steadily declining. On November 2, it was Rs 10 per share, down from Rs 30 on October 29 and Rs 45 on October 25.
GMP is the unlisted market premium that a company’s shares attract.
Notably, experts had given the IPO a thumbs down due to its high prices and murky profitability outlook.
“The firm has had an amazing trajectory highlighted by exponential development over the previous half-decade, signaling great future possibilities, bolstered by a noteworthy gross margin of more than 70% and an asset-light business strategy. However, despite its recent profitability, the organization’s continued fight to strengthen its bottom line and secure long-term profits development necessitates caution.
Honasa claimed an 80% sales CAGR from FY21 to FY23 to reach Rs 1,492.7 crore, compared to a 28% CAGR for other BPC firms, and it swung to an Ebitda of Rs 22.8 crore in FY23 from a loss of Rs 1,334 crore in FY21.
“Based on its annualized FY24 EPS, the IPO appears to be aggressively priced at 97x, discounting all immediate positive factors, and appears to be leveraging the company’s proven track record to justify a premium valuation.” As a result, we suggest a ‘AVOID’ rating for the problem and would review the firm if profitability improved consistently and sustainably,” they stated.
Honasa Consmuer was founded in 2016 and owns several businesses, the most prominent of which being Mamaearth. Mamaearth was founded to meet a fundamental customer demand for safe-to-use natural goods, and the company concentrates on providing toxin-free beauty products created from natural components.
While Mamaearth was created from scratch in 2016, Honasa Consumer Limited has enhanced its market position by purchasing five other important brands, including The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s, and has constructed a ‘House of Brands’ architecture. Its range of brands with distinct value propositions includes infant care, face care, body care, hair care, color cosmetics, and fragrances.
“Honasa Consumer is a cutting-edge company best known for its flagship brand, Mamaearth.” However, the company’s financial success has been erratic, and it has reported losses in recent fiscal years. Its purchased subsidiaries have also suffered losses. Furthermore, the firm does not produce its products and instead relies on third parties, and it does not have any patents on its product formulae,” claimed Swastika Investmart.
The brokerage also advised to ‘avoid’ the IPO since the company’s return on advertising has been steady for a few years, i.e., 2.5 percent. As a result, the company’s client retention is extremely poor.