Mamaearth parent Honasa Consumer stock may see a flat to marginally positive listing, according to analysts. Mamaearth’s IPO sailed through the tough waves in the market, led by qualified institutional bidders (QIB) who bought 11.5 times while the retail investors remained cautious, subscribing 1.4 times the allotted quota.
“The subscription data saw better than street estimation and the market view has now turned neutral from a cautious one despite the risk of investing in a loss-making business, a high portion of OFS, high competition with margin pressure and low promoter stake which suggest a cautionary stand as historical listings with high valuations have often faced post-listing challenges,” said Prashanth Tapse, Research Analyst and Sr VP Research at Mehta Equites.
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Varun Alagh and Ghazal Alag-owned firm raised Rs 1,701 crore via the IPO. The offer comprised a fresh issuance of shares worth Rs 365 crore and an offer-for-sale of 4.13 crore equity shares by promoters and investors. The price band for the offer, which opened on October 31 and closed on November 2, was fixed at Rs 308-324 per share.
Tapse expects a flat listing and advises allotted conservative investors to book profits on the listing day and wait and watch for better pricing post listing while risk-takers can consider holding it long-term for potential high product growth.
However, Anushi Vakharia, Research Analyst, StoxBox expects the stock to open marginally higher due to the decent subscription figures.
“Based on its annualized FY24 EPS, the IPO appeared to be aggressively priced at 97x, discounting all immediate positive factors and seemed like the company was leveraging its proven track record to justify a premium valuation,” said Vakharia.
Several analysts had earlier advised investors to ‘Avoid’ subscribing to the issue owing to its high valuation, over Rs 150 crore loss in FY23, high spending on marketing and dependence on third-party manufacturers and its flagship brand Mamaearth.
The company reported a net loss of Rs 150.9 crore during the year ended March 2023, impacted by the impairment loss on goodwill and other intangible assets, against a profit of Rs 14.4 crore in the previous year. The volume growth fell significantly to 68.23 percent in FY23 from 143.3 percent in FY22 and 298.42 percent in FY21. However, revenue from operations grew at a CAGR of 80.14 percent during FY21-FY23.
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Vakharia advises investors who are allotted shares to book profits, if any, on the listing day and to revisit the company following consistent and sustainable improvement in profitability.
Honasa Consumer claims to be the largest digital-first beauty and personal care company in India in terms of revenue from operations for the fiscal FY23. Its Mamaearth brand, which launched in 2016, has emerged as the fastest-growing BPC brand in India to reach an annual revenue of Rs 1,000 crore within six years.
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