Mamaearth IPO: Analysts cautious on Honasa Consumer shares post listing; here’s what you can do now
The Rs 1,701.44 crore IPO that closed on November 2 was oversubscribed by 7.61 times
- Nov 7, 2023,
- Updated Nov 7, 2023 4:07 PM IST
Honasa Consumer, which operates with the brand name Mamaearth, witnessed a decent debut on stock exchanges on Tuesday. Shares of the company closed 4.17 per cent higher at Rs 337.50 on the BSE against the issue price of Rs 324. On the other hand, it settled 4.10 per cent up at Rs 337.30 on the NSE. On the other hand, the benchmark BSE Sensex closed 0.03 per cent lower at 64,942.40.
Market watchers are cautious on Honasa Consumer shares post listing. Earlier, the Rs 1,701.44 crore initial public offering (IPO), whose issue closed on November 2, got oversubscribed by 7.61 times last week.
Anushi Vakharia, Research Analyst, StoxBox said, “We continue to remain cautious with the company’s ongoing struggle to fortify its bottom line despite its recent attainment of profitability and ensure a sustainable earnings growth demand going forward. Coming to the valuation, the IPO was aggressively priced at 97 times (based on its annualised FY24 EPS), discounting all immediate positive factors, and seems like the company is leveraging its proven track record to justify a premium valuation.”
Honasa Consumer had fixed a price range of Rs 308-324 a share. The Gurugram-based beauty and personal care company was founded in 2016 by husband-wife duo Varun and Ghazal Alagh. Since launching Mamaearth in 2016, it has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s and have built a ‘House of Brands’ architecture. As of June 30, 2023, its portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, colour cosmetics and fragrances segments.
Mahesh M Ojha, AVP-Research and Business Development, Hensex Securities said, “We believe the IPO is overpriced and investors can re-enter at lower levels.”
Prashanth Tapse Sr VP Research analyst at Mehta Equities said, “We continue to remain cautious on Mamaearth on the back of the loss-making nature of the business, high portion of offer for sale (OFS), high competition with margin pressure, low promoter stake and weak financials which suggest a cautionary stand as historical listings with high valuations have often faced post-listing challenges.” The company will not receive any proceeds from the offer for sale and the proceeds received from the offer for sale will not form part of the net proceeds.
Shivani Nyati, Head of Wealth, Swastika Investmart said, “While Honasa Consumer is still a relatively young company, it has quickly grown to become a major player in the Indian BPC market. The company has a diverse product portfolio that includes face care, baby care, hair care, body care, colour cosmetics and fragrances. However, the financial condition of the company is facing some turbulence and there are other operation-related risks as well. Investors are now suggested to book profit and exit their position.”
Also read: Mamaearth shares disappoint at debut; Honasa Consumer debuts with 2% premium at Rs 330
Also read: Hot stocks on November 7: Suzlon Energy, Zomato, Dalmia Bharat, Radico Khaitan and more
Honasa Consumer, which operates with the brand name Mamaearth, witnessed a decent debut on stock exchanges on Tuesday. Shares of the company closed 4.17 per cent higher at Rs 337.50 on the BSE against the issue price of Rs 324. On the other hand, it settled 4.10 per cent up at Rs 337.30 on the NSE. On the other hand, the benchmark BSE Sensex closed 0.03 per cent lower at 64,942.40.
Market watchers are cautious on Honasa Consumer shares post listing. Earlier, the Rs 1,701.44 crore initial public offering (IPO), whose issue closed on November 2, got oversubscribed by 7.61 times last week.
Anushi Vakharia, Research Analyst, StoxBox said, “We continue to remain cautious with the company’s ongoing struggle to fortify its bottom line despite its recent attainment of profitability and ensure a sustainable earnings growth demand going forward. Coming to the valuation, the IPO was aggressively priced at 97 times (based on its annualised FY24 EPS), discounting all immediate positive factors, and seems like the company is leveraging its proven track record to justify a premium valuation.”
Honasa Consumer had fixed a price range of Rs 308-324 a share. The Gurugram-based beauty and personal care company was founded in 2016 by husband-wife duo Varun and Ghazal Alagh. Since launching Mamaearth in 2016, it has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s and have built a ‘House of Brands’ architecture. As of June 30, 2023, its portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, colour cosmetics and fragrances segments.
Mahesh M Ojha, AVP-Research and Business Development, Hensex Securities said, “We believe the IPO is overpriced and investors can re-enter at lower levels.”
Prashanth Tapse Sr VP Research analyst at Mehta Equities said, “We continue to remain cautious on Mamaearth on the back of the loss-making nature of the business, high portion of offer for sale (OFS), high competition with margin pressure, low promoter stake and weak financials which suggest a cautionary stand as historical listings with high valuations have often faced post-listing challenges.” The company will not receive any proceeds from the offer for sale and the proceeds received from the offer for sale will not form part of the net proceeds.
Shivani Nyati, Head of Wealth, Swastika Investmart said, “While Honasa Consumer is still a relatively young company, it has quickly grown to become a major player in the Indian BPC market. The company has a diverse product portfolio that includes face care, baby care, hair care, body care, colour cosmetics and fragrances. However, the financial condition of the company is facing some turbulence and there are other operation-related risks as well. Investors are now suggested to book profit and exit their position.”
Also read: Mamaearth shares disappoint at debut; Honasa Consumer debuts with 2% premium at Rs 330
Also read: Hot stocks on November 7: Suzlon Energy, Zomato, Dalmia Bharat, Radico Khaitan and more