Mamaearth IPO Day 3: Rs 1,701 Crore IPO Fully Subscribed Driven By Institutional Buyers

India's largest digital-first beauty and personal care (BPC) company, Honasa Consumer the operator of its flagship and popular brand Mamaearth, oversubscribed on the last day of its initial public offering (IPO). The Rs 1,701 crore IPO witnessed huge demand from institutional investors and employees, while the portion reserved for high-networth and retail investors also showed decent appetite.

As per the data on NSE, Mamaearth IPO received bids of 12,53,98,806 equity shares, against the offered size of 2,88,99,514 equity shares, registering an oversubscription of 4.34 times at around 14:09 pm.

Till now, the portion reserved for qualified institutional buyers (QIBs) oversubscribed by 7.21 times. QIBs included foreign institutional investors, domestic financial institutions such as banks, insurance companies, mutual funds and others.

While the Non Institutional Investors (NII) category subscribed 91% of the reserved size for them, and the Retail Individual Investors (RIIs) subscribed 86% of the offered size. On the contrary, employees category oversubscribed by 4.24x.

NIIs included corporates, individuals other than RIIs generally investors who buy shares more than Rs 2 lakh worth. Meanwhile, retail investors are those who invest maximum up to Rs 2 lakh.

The IPO was launched on October 31st, and will close on Thursday, November 2. The 100% book building has a price band of Rs 308 per share to Rs 324 per share respectively. While bid lot size is 46 Equity Shares and in multiples thereof. The company is also offering Rs 30 per share discount to eligible employees.

Companies like Kotak Mahindra Capital Company, Citigroup Global Markets India Private, JM Financial and J.P. Morgan India Private are acting as the booking running lead managers of the IPO. While KFin Technologies (formerly known as KFin Technologies) is the registrar of the issue.

Honasa plans to utilize the proceeds from fresh issue for advertisement expenses towards enhancing the awareness and visibility of brands; capital expenditure y for setting up new EBOs; investment in subsidiary Bhabani Blunt Hairdressing Private Limited ("BBlunt") for setting up new salons; and general corporate purposes and unidentified inorganic acquisition.

In its IPO note, SMIFS Limited said that Honasa is looking to benefit from: i. Honasa increasing offline footprint by increasing new Mamaearth EBOs across a mix of mall stores and high-street outlets in India. Between FY 21-23, Honasa has grown its offline channel over six times, as it is estimated to have retailed products through 154,447 FMCG retail outlets in India. ii. Honasa had a market share (in terms of gross merchandise value) aggregating to approximately 5.4% of the online BPC market which is expected to grow at around 25% annually between 2022 and 2027. iii. The company has achieved a revenue CAGR of 80.14% between FY21 and FY23 (from INR 4,599.90 million in FY21 to INR 14,927.48 million in FY23), while the median revenue CAGR of all other BPC companies was 28%. Of the total revenues online revenue portion was 59.36%, which is expected to grow rapidly in the coming quarters as the new brands also gain traction. Growth from its flagship Mamaearth business was ~35% YoY in FY23 which represented 78% of total revenues. Its EBITDA was reported at INR 227.64 million in FY23 which grew 20.53% YoY with an EBITDA margin of 6.83% compared with 6.77% in FY21

However, the IPO note added, "the company has reported a restated loss of INR 1,509.66 million in FY23 as compared to a restated profit of INR 144.43 million in FY22. At the upper end of the price band, the EV/Gross profit translates to ~10.69x with an industry average of ~16.94x. Urbanisation and rising per capita incomes above the crucial USD 2000 levels should result in high growth for the segments that the company operates in couple with that the new brands that have yet to achieve scale and we think the company could clock very healthy growth rates going forward, as the path maybe long and challenging we think that the issue is best suited for investors seeking to take moderate risk and invest for the long haul.

Honasa Consumer Ltd. is the largest digital-first beauty and personal care (BPC) company in India in terms of revenue from operations for FY23. The company started operations with its flagship brand Mamaearth in 2016and gradually expanded its brand to five other BPC brands viz. The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth's, each with differentiated value propositions. Honasa's products portfolio includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments.