Behind the numbers: Mamaearth's IPO valuation explained
Dive into our comprehensive analysis to understand its valuation and decide if it's the right move for your portfolio.
The initial public offer (IPO) of Honasa Consumer, the company behind the popular brand, is open for subscription. The company aims to raise Rs 1,701 crore through its share sale. Despite fine-tuning the pricing, analysts offer mixed opinions on the IPO, primarily due to what they perceive as not-so-cheap valuations. Let's delve into the details and examine this offering in depth.
Valuation and pricing
The IPO is priced in the range of Rs 308-324 per share, with the upper end of this range valuing the company at nearly Rs 10,500 crore. While some experts suggest that long-term investors may find value in the company's growth potential, others caution that the valuations are a tad high for short-term investors to expect substantial listing gains.
Offer structure
The IPO comprises a fresh equity issue of Rs 365 crore and an offer for sale of about 4.12 crore shares. The founders, Varun Alagh and Ghazal Alagh, alongside investors like Kunal Bahl, Shilpa Shetty, and Rishabh Mariwala, will be selling their partial stakes. Investors have the flexibility to bid for a minimum of 46 shares in one lot and multiples thereafter. The allocation includes 75% for qualified institutional buyers, 15% for non-institutional investors, and the remaining 10% for retail investors. The company's employees will enjoy a discount of Rs 30 per share and a reservation of equity shares worth up to Rs 10 crore.
Investor sentiment
While the company has become the largest digital-first beauty and personal care (BPC) firm in India in terms of revenue in FY23, opinions on the IPO remain divided. Some suggest conservative investors take a wait-and-see approach, while those inclined to take risks may consider a long-term investment for potential growth. However, there is consensus that the IPO appears to be overvalued in the current market conditions, and historical listings with high valuations have often faced post-listing challenges.
Utilisation of proceeds
Proceeds from the listing will be channelled into various areas, including advertising expenses, capital expenditure for setting up new exclusive brand outlets (EBOs), investment in subsidiary for opening new salons, and general corporate purposes and unidentified inorganic acquisitions.
Bankers to the issue
Kotak Mahindra Capital Company, Citigroup Global Markets India, JM Financial, and JP Morgan India are the bankers on the issue, underscoring the importance and complexity of this IPO.
Financial snapshot
In FY23, Honasa Consumer posted a loss of Rs 151 crore, a sharp contrast to the profit of Rs 14.4 crore recorded the previous year. However, the company experienced a remarkable 58% surge in revenues to Rs 1,493 crore during the same period. In the June quarter, revenue from operations soared by 49% to reach Rs 464 crore, and net profit stood at Rs 9.24 crore, a significant improvement from the loss of Rs 2.51 crore in the same quarter the previous year.
Investing is as much about understanding the numbers as it is about intuition. As Mamaearth's IPO takes center stage, ensure you're equipped with all the knowledge to make an informed decision. Stay tuned for more insights and happy investing!