Mamaearth IPO Day 3: Honasa Consumer issue subscribed 2.75 times so far on QIB push

Honasa Consumer, the parent company of Mamaearth, saw its initial public offering (IPO) sail through on the third and last day of the bidding process as institutional investors came to save the for it.

According to BSE data, the investors made bids for 7,92,44,246 equity shares, or 2.75 times, compared to the 2,88,99,514 equity shares offered for the subscription by 1.30 pm on Thursday, November 2. The three-day bidding for the issue opened on Thursday, October 31 and concludes today.

The portion reserved for qualified institutional bidders (QIBs) was subscribed 4.39 per cent, while the allocation for retail investors saw a subscription of 82 per cent. The allocation for employees was 4.10 times, while the quota set aside for non-institutional investors (NIIs) was 74 per cent at the same time.

The primary offering was booked only 13 per cent on day one, while it ended day two with a subscription of 70 per cent.

Honansa Consumer is offering its shares in the price band of Rs 308-324 apiece with a lot size of 46 equity shares and its multiples thereof. The consumer products maker is looking to raise Rs 1,701 crore via IPO route, which consists of a fresh issue size of Rs 365 crore, while its promoters and selling shareholders will offload up to 4.12 crore equity shares via offer-for-sale (OFS).

Brokerage firms have a mixed view on the stock. Analysts suggesting to 'avoid' the issue are skeptical on the aggressive pricing, loss-making nature of the business, high portion of OFS and weak financials. Those who have a 'subscribe' tag are positive by the expansion of the BPC segment and its reach across the online and offline channels.

Honasa is a rapidly expanding online BPC product marketing company. While their revenue has experienced significant growth in recent years, their profitability has faced challenges in staying positive. No listed company shares an identical business model. However, for valuation purposes, we have taken the above-mentioned company for comparison, said Choice Broking.

"At a higher price band, Honasa is demanding a TTM P/S multiple of 6.3 times, which is at a slight discount to its adjusted peer average. While the valuation may seem attractive, it is important to consider the sustained losses and volatile profitability. Thus, we assign a 'subscribe with caution' rating for the issue," it said.

On Monday, Honasa Consumer allocated 2,36,17,228 shares to 49 anchor investors to raise Rs Rs 765.2 crore. Kotak Mahindra Capital, Citigroup Global Markets, JM Financial and JP Morgan India are lead managers for the IPO, while Kfin Technologies is the registrar for the issue. 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.

Company has Brand building capabilities and repeatable playbooks. Also, the company's Customer centric product innovation and digital-first omnichannel distribution along with data driven contextualised marketing with Ability to drive growth and profitability in a capital efficient manner infuses optimism in long term growth outlook, said Hem Securities with 'subscribe for long-term' tag.

 

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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