Honasa Consumer IPO subscribed 7.6x with aggressive QIB push

• QIBs bid aggressively for the issue on the last day, but its retail book was just about fully subscribed.
• Company has raised as much as ₹765 crore from the anchor investors ahead of its IPO.
• It plans to use net proceeds from the IPO towards ad expenses, set-up brand, invest in subsidiaries and more.

Mamaearth’s parent company, Honasa Consumer’s initial public offer was subscribed 7.6 times the shares on offer – with good interest from institutional investors.

Qualified institutional buyers (QIBs) stepped up on the last day and this portion was subscribed 11 times on Thursday. While the non-institutional investor portion was subscribed four times over, the retail book was just about fully subscribed with 1.3 times over the shares on offer.

The ₹1,701 crore issue had allocated only 10% of the offer to retail investors, 15% was for non-institutional investors and 75% to qualified institutional buyers (QIBs).

Its price band for the issue has been fixed at ₹308-324. Investors can bid for a minimum of 46 shares in multiples thereof.

The company raised as much as ₹765 crore from the anchor investors ahead of its IPO. Some of its investors include Abu Dhabi Investment Authority (ADIA), Goldman Sachs Singapore and more.

Type of investor	No of times subscribed
Qualified Institutional Buyers	11.5
Non-institutional Investors	4.02
Retail	1.35
Total	7.61

Source: BSE




An acid test for D2C brands

Honasa Consumer is a house of brands in the beauty and personal care space. It has incubated brands like Mamaearth and has also inorganically grown by acquiring BBlunt salons.It has brands like The Derma Co, Dr Sheth’s, Aqualogica and Ayuda in its kitty.

The company intends to use net proceeds from the fresh issue towards advertisement expenses, to set-up exclusive brand outlets, investment in its subsidiary, BBlunt, general corporate purposes and unidentified inorganic acquisitions.

The company slipped back into losses in FY23, after posting profits in FY22. It was due to an impairment loss it had to take in the last financial year to the tune of ₹154 crore.

“This was primarily due to the management decision to scale down the majority of the business verticals of Momspresso, a content platform operating under our subsidiary, Just4Kids Services, and acquired by us in December 2021,” the company said.

Its ad expenses stood at 34.99% of its revenue from operations as of June end. Apart from that, it’s in a segment that’s extremely competitive. Some of these competitors are larger and have substantially greater resources than them. That gives them the ability to spend more on advertising and marketing and offer substantial discounts, the company quotes as risk factors in its RHP.

“The revenue for the company has grown at a CAGR of 80% over FY21-23 with a volume growth of 102.28%. The company has an adjusted EBITDA of 3.4% as on FY23 with negative working capital on account of asset light model that enables them to invest more on marketing, technology and product innovation,” says a report by Canara Bank Securities that gave it a ‘subscribe for the long-term’ rating.