Is Honasa Consumer IPO a Smart Investment? Examining Mamaearth’s Parent Company Public Offer

“Is Honasa Consumer IPO a Smart Investment? Examining Mamaearth’s Parent Company Public Offer”

“Is Honasa Consumer IPO a Smart Investment? Examining Mamaearth’s Parent Company Public Offer”

Honasa Consumer Limited, known for its Mamaearth brand, has officially commenced its Initial Public Offering (IPO) in the primary market, with the subscription period open until November 2, 2023.

The IPO is priced in the range of Rs 308 to Rs 324 per equity share and is set to be listed on both the BSE and NSE. Currently, the Honasa Consumer IPO is trading in the unlisted market with a grey market premium (GMP) of Rs 7, maintaining its value from the previous day.

By 12:05 pm on the first day of the offering, the Mamaearth IPO had garnered subscription bids equivalent to 0.04 times the total offering. In the retail segment, subscriptions amounted to 0.18 times, while the Non-Institutional Investors (NII) segment witnessed a subscription of 0.01 times.

The question arises: Is it advisable to subscribe to this IPO?

Analysts have expressed divergent opinions on the Honasa Consumer IPO, primarily due to concerns over its valuation and inconsistent financial performance.

Shivani Nyati from Swastika Investmart pointed out that while Honasa is a well-known modern company with its flagship brand Mamaearth, its financial performance has been irregular. “It has reported losses in recent fiscal years. Subsidiaries that it has acquired have also incurred losses. Additionally, the company does not manufacture its products but relies on third parties for that, and it does not hold any patents over its product formulas.” Nyati advised investors to steer clear of this offering. Value broker Stoxbox similarly expressed concerns about the aggressively priced IPO and recommended avoiding it.

In contrast, Emkay Global has issued a “subscribe” recommendation for the IPO. The brokerage evaluated the stock’s valuation under various scenarios. If the company manages to double its revenue within three years and enhance operating profit margins to around 12 percent, it is considered an “attractive” investment.

Conversely, if the company maintains a revenue Compound Annual Growth Rate (CAGR) of 20 percent with operating profit margins of 10 percent, it is categorized as “fair.”

In the scenario where the company achieves a revenue CAGR of approximately 10 percent and maintains margins at around 6 percent, it is termed “expensive.”

Axis Capital refrained from assigning a rating to the IPO but emphasized that Honasa has achieved an impressive revenue CAGR of 80.14 percent between FY21 and FY23, surpassing most other companies in the Beauty and Personal Care (BPC) sector.

Key Details of the Honasa Consumer IPO:

• Grey Market Premium (GMP): Shares of Honasa Consumer Limited are trading at a premium of Rs 7 in the grey market.
• Price Band: The price band for the public issue is set between Rs 308 and Rs 324 per equity share.
• Subscription Period: The Honasa Consumer IPO commenced today and will be open for subscription until November 2, 2023.
• IPO Size: The company’s promoters aim to raise Rs 1,701 crore through this public offering.
• Lot Size: Investors can apply for the IPO in lots, with each lot consisting of 46 company shares.
• Minimum Investment: As one lot comprises 46 company shares, the minimum investment required to apply for the IPO is Rs 14,904.
• Allotment Date: The Mamaearth IPO allotment is expected to be finalized on either November 3, 2023, or November 6, 2023, depending on the T+3 listing cycle.
• IPO Listing: The public offering is scheduled to be listed on both the BSE and NSE on November 10.