Mamaearth shares hit 20% upper circuit as Q2 profit nearly doubles

Shares of Honasa Consumer, the parent of popular skincare brand Mamaearth, witnessed strong buying today as investors cheered the beauty and personal care (BPC) company’s second quarter results. The stock, which made its market debut on November 7, 2023, hit its 20% upper circuit limit in early trade today amid strong volume trade. This is the first quarterly result after the company, co-founded by the husband-wife duo of Varun and Ghazal Alagh, got listed on the bourses after successfully raising ₹1,701 crore via initial public offering (IPO). 

Paring previous session losses, Honasa shares opened 7.95% higher at ₹380.10 against the previous closing price of ₹352.10 on the BSE. In the first hour of trade so far, the midcap stock rose 20% to hit its fresh record high of ₹422.50, while the market capitalisation increased to ₹13,594 crore. On the volume front, 4.9 lakh shares changed hands over the counter as compared to two-week average of 3.1 lakh shares.

At the current levels, Mamaearth shares trade 30% higher than its issue price of ₹324. The share price of the company made a flat debut on the bourses after receiving a decent subscription from investors. However, the stock gained momentum recently, rising 27% in the last four sessions.

For the July-September quarter of FY24, Honasa reported a 93% growth in its net profit at ₹29.4 crore as compared to ₹15.2 crore profit during the same period last year. The revenue from operations surged 21% to ₹496 crore against ₹410 crore recorded in the same quarter last year, driven by string volume.

Mamaearth CEO and chairman Varun Alagh says the company's business has grown by 33% YoY in H1 FY24, which is 3.8 times the median growth of FCMG companies in India. "Mamaearth, our largest brand has entered the Top 15 BPC brands in India...Our profits grew much faster than our revenues, with H1 PAT growing by 1,377% to ₹54 crore. Dr Sheths has become the 4’th brand from Honasa portfolio to enter the ₹150 crore Club after Aqualogica and Derma Co," says Alagh.

For the first half of the fiscal 2024 (H1 FY24), the digital-first beauty and personal care company delivered ₹961 crore in revenue from operations, growing 33% YoY, driven by volume growth of 35% YoY. It achieved an EBITDA of ₹70 crore and PAT came out to be at ₹54 crore. 

Honasa, which raised ₹365 crore by issuing fresh equity shares and the remaining ₹1,336 crore via OFS, intends to use the capital from the fresh issues 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.  

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