Mamaearth IPO: Honasa Consumer off to a slow start, issue booked 11% on Day 1 so far

The initial public offering (IPO) of Honsa Consumer, the parent company of Mamaearth, saw a dull response from the investors during the first few hours of the bidding process on the day one. The issue, which kicked-off for bidding on Tuesday, October 31, mostly drew retail and employee investors for the bidding.

Honansa Consumer is selling its shares in the price band of Rs 308-324 apiece 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 its promoters and other selling shareholders.

According to the data, the investors made bids for 31,75,196 equity shares, or only 11 per cent, compared to the 2,88,99,514 equity shares offered for the subscription by 2.30 pm on Tuesday, October 31. The three-day bidding for the issue will conclude on Thursday, November 2.

Also read: Mamaearth IPO: Should you subscribe to Honasa Consumer's primary offering?

The portion reserved for retail investors was subscribed 27 per cent, while the allocation for non-institutional investors (NIIs) saw a subscription of merely two per cent. The allocation for employees was 1.75 times, while the quota set aside for qualified institutional bidders (QIBs) was 10 per cent  at the same time.

Majority of the brokerage firms are not very positive and have suggested to give the issue a skip. They are citing aggressive pricing, high portion of OFS, loss making nature of the business and weak financial of the company as the key reasons for it. However, a few are positive on growing demand for beauty and personal care products among the consumers.

Looking at the factors, risks and opportunities we are neutral on the company. The investors may observe a few upcoming quarters for consistent profitability and may apply for the issue with a medium to long-term view, said Sushil Finance in its IPO note.

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.

The Gurugram-based company 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.

Honasa has an adjusted EBITDA of 3.4 per cent 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, said Canara Bank Securities. "The company continuously strives for expansion of distribution by creating brand awareness," it said with a 'subscribe for long term' rating.
 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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