Mamaearth parent Honasa Consumer shares close 4% higher on debut

Honasa Consumer, the parent company of the beauty and personal care brand Mamaearth raised Rs 1,701 crore via public issue of more than 5.2 crore equity shares, last week

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Honasa Consumer failed to attract robust response from investors on the debut as shares closed with single-digit premium of 4 percent on November 7, which was largely on expected lines given the volatility in financials though it has a diverse products range.

The stock opened at Rs 330 on the NSE, up 1.85 percent over the issue price of Rs 324 per share. It dipped below the issue price in late morning deals by hitting the day’s low of Rs 321.1, but immediately rebounded and stayed higher for rest of the session.

The stock touched an intraday high of Rs 340.45 in the afternoon, before closing the day 4.04 percent higher at Rs 337.10 with volume of 3.01 crore equity shares, while on the BSE, it settled at Rs 337.15, up 4.06 percent with volume of 8.22 lakh shares.

Also read: Honasa Consumer makes muted debut: Should you buy, sell or hold Mamaearth stock?

The parent company of the beauty and personal care brand Mamaearth raised Rs 1,701 crore via public issue of more than 5.2 crore equity shares, last week. The issue comprised a fresh issuance of shares worth Rs 365 crore and an offer-for-sale of Rs 1,336 crore by promoters & investors.

The price band for the offer was Rs 308-324 per share.

Honasa Consumer has a diverse product portfolio that includes face care, baby care, hair care, body care, color cosmetics, and fragrances. Apart from Mamaearth, its own brand, the firm has strengthened its position in the market by acquiring five other major brands, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s, and has built a house of brands architecture.

Also read: Mamaearth IPO Listing: Co-founders Varun and Ghazal Alagh talk about their plans to go global eventually

"While Honasa Consumer is still a relatively young company, it has quickly grown to become a major player in the Indian BPC market. However, the financial condition of the company is facing some turbulence, and there are other operation-related risks as well," Shivani Nyati, head of wealth at Swastika Investmart said.

Prashanth Tapse, Research Analyst, Senior VP Research at Mehta Equites also said even though subscription data (7.94 times) saw better than street estimation, market view has now turned neutral from cautious outlook despite the risk of investing in a loss-making nature of the business, high portion of 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.

On the financials front, Varun and Ghazal Alagh-owned Honasa Consumer recorded revenue growth at a CAGR of 80.14 percent during FY21-FY23, to Rs 1,492.75 crore in FY23, but has seen volatility on the profitability front, though performance at EBITDA level remained strong.

The firm had a net loss of Rs 142.8 crore during the year ended March FY23, impacted by the impairment loss on goodwill and other intangible assets (Rs 154.7 crore), against profit of Rs 15.7 crore in previous year. In FY21, it had a loss of Rs 1,332.2 crore largely due to the change in fair valuation of preference shares.

The EBITDA (earnings before interest, tax, depreciation and amortisation) for FY23 surged nearly 98 percent on-year to Rs 22.8 crore with margin expansion of 30 bps at 1.52 percent compared to previous year.

For the June FY24 quarter, net profit stood at Rs 25.96 crore against loss of Rs 9.3 crore in corresponding period last fiscal. Revenue from operations during the same period surged 49 percent to Rs 464.5 crore.