Mamaearth IPO subscribed 7.5 times on final day after slow start

The initial public offering (IPO) of Honasa Consumer Ltd, the parent of popular skincare brand Mamaearth, has managed to garner a strong response from investors on the third day, after a lukewarm response in the first two days of bidding. The public offer was subscribed merely by 13% on day 1, followed by 70% bidding on the second day.

The public issue of the country’s largest digital-first beauty and personal care company, however, gained momentum on the final day, with the offer subscribing by 7.5 times by 4:00 pm on the final day of bidding, supported by qualified institutional buyers (QIBs). As per the BSE data, the issue received bids for 21.82 crore shares against 2.88 crore shares on offer, the BSE data showed.

The QIB quota was booked 11.5% times, followed by non-institutional investors (NIIs) as the portion reserved for them was subscribed 3.94 times. The portion for retail investors received 1.15 times bidding. The quota reserved for employees was booked 4.6 times.

Honasa has reserved 10% of the issue for retail investors, up to 15% for non-institutional investors (NIIs), and up to 75% for qualified institutional buyers (QIBs). The company has offered a 30% discount per equity share to eligible employees bidding in the IPO.

The skincare company, co-founded by the husband-wife duo of Varun and Ghazal Alagh, is looking to raise about ₹1,701 crore at the upper end of the IPO price band of ₹308-324 per share, seeking a valuation of around ₹10,500 crore. The lot size is 46 equity shares and in multiples thereafter.

The IPO of the fast-growing D2C (direct-to-consumer) beauty and personal care unicorn is a mix of a fresh issue of equity shares and an offer for sale (OFS) by existing shareholders. It proposes to raise ₹365 crore by issuing fresh equities and the remaining ₹1,336 crore by OFS of 41,248,162 equity shares by existing shareholders. The two promoters Varun Alagh and Ghazal Alagh, as well as existing shareholders Rohit Kumar Bansal and Sofina Ventures will offload their stake in the company. Among others, Bollywood celebrities Shilpa Shetty Kundra and Kunal Bahl will also pare their shares in the company.  

Honasa intends to use the capital raised through net proceeds from the fresh issue towards advertisement and capital expenses, investment in its subsidiary, and meet general corporate purposes. Of the ₹365 crore raised from fresh issue, it proposes to invest ₹186 crore to meet advertisement expenses towards enhancing the awareness and visibility of its brands; ₹34.23 crore to incur capital expenditure for setting up new EBOs; and ₹27.52 crore for investment in its subsidiary, Bhabani Blunt Hairdressing for setting up new salons. A part of the fund will be also used to meet general corporate purposes and unidentified inorganic acquisitions.

Ahead of the public offering, Honasa raised ₹765.20 crore from anchor investors on October 30, 2023. It allotted 2.36 equity shares to 49 anchor investors at the upper price band, which saw participation from foreign as well as domestic investors, with foreign portfolio investors (FPIs) allocated nearly 54.7% of anchor allocation, and the remaining to domestic investors.

Founded in 2016, Honasa Consumer is the largest digital-first beauty and personal care (BPC) company in India in terms of revenue from operations for the financial year 2023, as per RedSeer report. Since launching flagship toxin-free skincare brand Mamaearth in 2016, Honasa has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s, and has built a ‘House of Brands’ architecture. As of September 30, 2022, Honasa Consumer portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, colour cosmetics, and fragrances segments.  

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)