Shilpa Shetty, Kunal Bahl, promoters to sell stake as Mamaearth parent goes in for an IPO

• Honasa Consumer plans to raise ₹400 crore from fresh issue of equity shares and an offer for sale (OFS).
• Co-founders of Mamaearth Varun and Ghazal Alagh, Snapdeal founder Kunal Bahl, Bollywood actress Shilpa Shetty Kundra are among the shareholders who will sell stake via the IPO.
• After launching Mamaearth in 2016, the company has added five new brands to its portfolio – The Derma Co., Aqualogica, Ayuga, BBlunt and Dr Sheth’s.
  

Digital-first beauty and personal care company Honasa Consumer, parent company of popular brands such as Mamaearth, BBlunt, Derma Co etc. may soon launch its initial public offering (IPO). It has filed its draft red herring prospectus (DRHP) with market regulator SEBI to raise funds through an IPO.

As per the DRHP, the company plans to raise ₹400 crore from fresh issue of equity shares, and will sell up to 4.68 crore equity shares via an offer for sale (OFS), wherein promoters and shareholders will sell their stake.

The shareholders who will sell stake in the company include co-founders of Mamaearth Varun and Ghazal Alagh; Snapdeal founder Kunal Bahl, Bollywood actress Shilpa Shetty Kundra, Sofina Ventures SA, Evolvence, Fireside Ventures, Stellaris Venture Partners among others.

The company intends to utilize net proceeds from the IPO towards advertisement expenses to enhance the awareness and visibility of its brands, capital expenditure for setting up new exclusive brand outlets (EBOs), and investment in its subsidiary, BBlunt for setting up new salons.

Ghazal Alagh was also a judge on Shark Tank India Season 1, a reality show where entrepreneurs pitch ideas for a business or product to raise money from judges.

The unicorn heads for an IPO
The company received its unicorn status in January 2022, and was one of the first to achieve the $1 billion valuation for the calendar year.

After launching Mamaearth in 2016, the company has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr Sheth’s. Its portfolio now includes products across baby care, face care, body care, hair care, colour cosmetics and fragrances.

The company has set up a dedicated in-house start-up team called ‘Brand Factory’ that works with founders for end-to-end ideation, incubation and execution of new brands.

Further, the company has to constantly follow up on changing consumer preferences, spending patterns, changing beauty and personal care trends to grow in the direct-to-consumer space.

The company faces various forms of unfair trade practices, such as the sale of counterfeit, cloned, lookalike and pass-off products. “In the past, we have experienced incidents of passing-off and the sale of counterfeit products. The sale of counterfeit, cloned and pass-off products may result in heightened public reputation risk for us along with possibility of legal and regulatory claims,” said the company.

Reliance on celebrities and social media influencers as part of its marketing strategy may adversely affect its business and demand for services, says the company in its DRHP.

“We face intense competition which may lead to a reduction in our market share, cause us to increase our expenditure on marketing and promotion as well as cause us to offer discounts, which may result in an adverse effect on our business and a decline in our profitability,” said the company.

While Honasa Consumer’s revenue has been increasing significantly, its profitability was impacted sharply in the last three financial years.
Source: DRHP

The company says it has witnessed net cash outflows from operating activities primarily due to increases in working capital requirement as a result of an increase in the scale of business and the shift in channel mix towards offline channel.


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