Mamaearth IPO: Honasa Consumer's issue booked 30% on Day 2 so far

Honasa Consumer's initial public offering (IPO) continued a dull response from the investors during the second day of the bidding process. The primary offering of Mamaearth parent was booked only 13 per cent on Tuesday, October 31, the first day of the bidding process. Honansa Consumer is offering its shares in the price band of Rs 308-324 per shares with a lot size of 46 equity shares and its multiples thereafter. The beauty and personal is looking to raise Rs 1,701 crore via IPO route, which consists of a fresh issue size of Rs 365 crore and offer-for-sale (OFS) of up to 4.12 crore equity shares by promoters and selling shareholders of the company. According to the data, the investors made bids for 87,14,746 equity shares, or 30 per cent, compared to the 2,88,99,514 equity shares offered for the subscription by 12.45 pm on Wednesday, November 1. The three-day bidding for the issue will conclude tomorrow, that is, Thursday, November 2. The portion reserved for retail investors was subscribed 50 per cent, while the allocation for non-institutional investors (NIIs) saw a subscription of merely six per cent. The allocation for employees was 2.73 times, while the quota set aside for qualified institutional bidders (QIBs) was 35 per cent  at the same time. Brokerage firms have a mixed view on the stock. Those suggesting to 'avoid' the issue are skeptical on the loss-making nature of the business, aggressive pricing, high portion of OFS and weak financials. Those who are positive, are swearing by the expansion of the BPC segment and its reach across the online and offline channels. At the upper price band of Rs.324, Honasa is available at a Mcap/sales of 5.6 times of FY24E annualised, which appears to be expensive. Considering its strong topline growth, decreasing trend of Ad spends, expansion plans, asset light business model and promising industry outlook, we assign a 'subscribe' rating on a long-term basis, said Geojit Financial Services. Honasa Consumer is in the business of beauty and Personal care. The company is poised to grow on back of rising specific needs and preferences of consumers within BPC category, brand recognition associated with natural ingredients, distribution expansion particularly offline channels and improvement in profitable unit economics, said IndSec Research with a 'subscribe for long term' rating. Honasa Consumer allocated 2,36,17,228 shares to 49 anchor investors to raise Rs Rs 765.2 crore. Kotak Mahindra Capital Company, Citigroup Global Markets India, JM Financial and JP Morgan India are book-running lead managers for the issue and Kfin Technologies is the registrar for the IPO. Shares of the company will be listed on both BSE and NSE. Mamaearth's client retention is very low. As it is a loss-making company, we cannot derive its actual P/E, but even after considering its outflow in the latest investment, the company is coming at an extremely high valuation. Thus, we suggest to 'avoid' this IPO, said Swastika Investmart.  

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