IPO listed on 7 Nov'23
Honasa Consumer Ltd
Minimum Investment
₹ 14,904 / 46 shares
Grey market premium
₹ 7 (2% premium)
Issue price
₹ 324
Listing price
₹ 333
Listing gains
9 (3%)
Listing on
Nov 07, 2023
Our Verdict:
Avoid
- Honasa Consumer, despite its impressive growth and dominant market position in the D2C BPC segment in India, presents several financial and strategic concerns that potential investors should heed. The company has displayed erratic financial performance, with significant losses in certain fiscal years and a reliance on a single brand for the bulk of its revenue.
- Furthermore, its anticipated IPO valuation is alarmingly high, being approximately 2,837 times its net profit. At an annualised Q1 run-rate, the IPO is being offered at a P/E multiple of 100x FY24E earnings.
- Considering these points, alongside other risks outlined below, potential investors should exercise caution and evaluate the company's future sustainability and growth prospects before deciding to invest in the IPO.
About the company
Founded in
16 Sep'16
Managing director
Varun Alagh
- Honasa Consumer Ltd stands as India's largest digital-centric beauty and personal care (BPC) enterprise in terms of operational revenue. It offers a range of beauty and personal care items.
- The company boasts modern FMCG brands including Mamaearth, The Derma Co., Aqualogica, Dr. Sheth‘s, BBlunt, and Ayuga, covering categories like baby care, face care, body care, hair care, makeup, and fragrance.
- Its flagship brand, Mamaearth, is the fastest growing BPC brand in India, championing the use of safe, natural ingredients and dedicating itself to the creation of toxin-free beauty solutions.
STRENGTHS
- Remarkable Expansion: From FY21-23, the company exhibited a notable growth, recording an 80% CAGR in its revenue. During the same timeframe, the average revenue CAGR for other BPC (Beauty & Personal Care) businesses available for comparison was just 28%.
- Excellent Gross Profit Margins: In FY23, the gross profit margin reached 70%, surpassing that of its industry peers.
- Robust Brand Growth: Post-acquisition, Dr. Sheth’s has surged 20-fold and now boasts an annual run-rate exceeding Rs 1 billion. Under the Honasa banner, BBlunt saw a 150% growth in its first year of launch, in stark contrast to stagnant sales over the previous five years.
- Market Dominance: In FY23, Honasa Consumer was the leading firm in the D2C BPC segment in India based on revenue from the D2C channel, with the Mamaearth brand contributing 56.9% of its total revenue.
RISK FACTORS
- Fluctuating Financial Performance: There's a noticeable fluctuation in the company's financial health. After declaring a substantial loss of Rs 1,332 crore in FY21, the company bounced back with a Rs 14.4 crore profit in FY22, only to report a loss of Rs 151 crore in FY23. Even if one discounts the impairment charges for FY23, the profit figure settles at a modest Rs 3.7 crore.
- Reliance on a Sole Brand: With ~82% of its revenue coming from the Mamaearth brand, the company's success is heavily tied to the performance of this single entity. Any changes in market dynamics affecting this brand could drastically impact the overall revenue.
- Steep Valuation: Despite registering a profit of just Rs 3.7 crore, the company's anticipated IPO valuation soars to an astonishing Rs 10,500 crore, which is about 2,837 times its net profit.
- Questionable Acquisition: Mamaearth closed its flagship and priciest acquisition – Momspresso (Just4Kids Services Pvt Ltd) in FY24. The acquisition of Momspresso at Rs 152.3 crore, when its intrinsic value was Rs 16.2 crore, prompts questions about the company's tactical choices.
- Underperforming Subsidiaries: With several subsidiaries, namely Just4Kids, BBlunt, B:Blunt Spratt, and Fusion, reporting losses in the past and an uncertain profitability outlook, there's no clear indication that these investments will turn profitable soon.
- Negative RoNW: A negative Return on Net Worth (RoNW) over the past three fiscal years and a -23.6% RoNW for FY23 demonstrate that the company isn't utilizing its equity efficiently to generate returns for shareholders.
- Cash Flow Concerns: The company's negative net cash outflow of Rs 51.55 crore in FY23 signals potential liquidity issues. Negative cash flows, especially from operational activities, suggest the core business might be struggling to generate cash.
- Modest Profit Margins: While the company boasts a healthy gross profit margin, its EBITDA margins are lackluster. A mere 1.5% EBITDA margin and 3.4% adjusted EBITDA margin in FY23 show that the company might be facing challenges in managing operational costs or other expenses.
Issue details
Issue type
Mainstream
Issue size
₹ 1701 crore
Fresh Issue
₹ 365 crore
OFS
₹ 1336 crore
Price range
₹ 308 - 324
Lot size
46 shares
Issue Objective
Net proceeds from the fresh issue will be utilised to fund:
- Advertisement expenses
- Capital expenditure for setting up new Exclusive Brand Outlets (EBOs);
- Setting up new BBlunt salons; and
- General corporate purposes
Dates
Bidding open
31 Oct'23
Bidding close
2 Nov'23
Allotment date
3 Nov'23
Refund date
6 Nov'23
Listing
7 Nov'23
IPO Reservations
Qualified institutional buyers
>75%
Non-institutional investors
<15%
Retail individual investors
<10%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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