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12 January 2024

Mamaearth IPO: Nurturing Growth, Seeding Confidence

Introduction:

Mamaearth IPO, a book-built issue commanding Rs 1,701.44 crores, is a blend of fresh and offer-for-sale shares. The bidding phase unfolded from October 31, 2023, to November 2, 2023. Post allotment on November 6, 2023, the shares commenced trading on both BSE and NSE on November 7, 2023.

Financial Breakdown:

The IPO's composition includes a fresh issue of 1.13 crore shares, amounting to Rs 365.00 crores, and an offer for sale of 4.12 crore shares, totaling Rs 1,336.40 crores. Priced between ₹308 to ₹324 per share, the minimum lot size for an application is 46 shares, requiring a minimum investment of ₹14,904.
As of January 12, 2024, the stock closed at ₹474.15, reflecting a 1.28% increase. The 52-week range witnessed a high of ₹502.95 (Jan 09, 2024) and a low of ₹256.30 (Nov 10, 2023).

Key IPO Statistics:

- IPO Duration: October 31, 2023, to November 2, 2023
- Listing Date: November 7, 2023
- Face Value: ₹10 per share
- Price Band: ₹308 to ₹324 per share
- Lot Size: 46 Shares
- Total Issue Size: 52,516,742 shares, aggregating up to ₹1,701.44 Cr
- Fresh Issue: 11,268,580 shares, aggregating up to ₹365.00 Cr
- Offer for Sale: 41,248,162 shares of ₹10, aggregating up to ₹1,336.40 Cr
- Employee Discount: Rs 30 per share
- Issue Type: Book Built Issue IPO
- Listing At: BSE, NSE

Equity Dynamics:

Pre-issue, Honasa Consumer Limited held 310,479,227 shares, a figure that increased to 321,747,807 post the IPO.

IPO Reservation Strategy:

The IPO reserved shares across categories, with 29.98% for QIB, 14.99% for NII, 9.99% for RII, 0.06% for employees, and 44.97% for Anchor investors. Retail investors had 114,092 minimum allottees, while sNII and bNII had minimum allotments of 644 and 3,128 shares, respectively.

Anchor Investors:

Mamaearth IPO successfully raised Rs 765.20 crores from anchor investors on October 30, 2023. The anchor lock-in period for 50% shares expires on December 20, 2023, and for the remaining shares, it ends on March 14, 2024.

IPO Timeline Highlights:

- IPO Open Date: Tuesday, October 31, 2023
- IPO Close Date: Thursday, November 2, 2023
- Basis of Allotment: Monday, November 6, 2023
- Initiation of Refunds: Monday, November 6, 2023
- Credit of Shares to Demat: Monday, November 6, 2023
- Listing Date: Tuesday, November 7, 2023
- Cut-off time for UPI mandate confirmation: 5 PM on November 2, 2023

Lot Size Landscape:

Investors had the flexibility to bid for a minimum of 46 shares and in multiples thereof. The table below outlines the investment parameters for retail investors and HNIs:

Application	Lots	Shares	Amount
Retail (Min)	1	46	₹14,904
Retail (Max)	13	598	₹193,752
S-HNI (Min)	14	644	₹208,656
S-HNI (Max)	67	3,082	₹998,568
B-HNI (Min)	68	3,128	₹1,013,472

Promoter Holding Perspective:

The promoters, Varun Alagh and Ghazal Alagh, held 37.41% of shares pre-issue, which decreased to 35.34% post the IPO.

Company Profile:

Incorporated in 2016, Honasa Consumer Limited (HCL) is a digital beauty and personal care (BPC) company in India, renowned for its brand Mamaearth. The company expanded its portfolio to include five additional brands: The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheth's. Mamaearth products are distributed through a multi-channel network both online and offline.

Financial Performance Snapshot:

As of June 30, 2023:

- Assets: ₹1,048.03 Crores
- Revenue: ₹477.10 Crores
- Profit After Tax: ₹24.72 Crores
- Net Worth: ₹638.26 Crores
- Reserves and Surplus: -₹1,290.94 Crores
- Total Borrowing: ₹6.79 Crores

Key Financial Indicators:

- RoNW: -23.57%
- EPS (Rs): 4.66
- P/E (x): 105.54

Objects of the Issue:

The Net Proceeds from the issue are intended for:
1. Advertisement expenses to enhance brand awareness. 2. Capital expenditure for setting up new Exclusive Brand Outlets (EBOs). 3. Investment in the subsidiary, Bhabani Blunt Hairdressing Private Limited ("BBlunt"), for establishing new salons. 4. General corporate purposes and unidentified inorganic acquisitions.

Expert Analysis:

While the issue is perceived as aggressively priced, investors with a medium to long-term horizon might find it rewarding.

IPO Subscription Status:

As of November 2, 2023, the Mamaearth IPO garnered a subscription of 7.61 times. Robust responses were seen in the QIB (11.50 times), NII (4.02 times), Retail (1.35 times), and Employee (4.88 times) categories. The total number of applications reached 119,510, reflecting a subscription of 1.05 times.

Note: All financial figures are in INR (Indian Rupees), and market-related data is as of January 12, 2024.