Mamaearth IPO has garnered mixed opinions from analysts, primarily due to not-so-cheap valuations, despite pricing adjustments in the offering, according to an ET report.The share price range falls between Rs 308-324, valuing the company at approximately Rs 10,500 crore at the upper end.
Mamaearth IPO: Should you subscribe?Avinash Gorakshakar of Profitmart Securities suggests that long-term investors may consider subscribing to the offer, banking on the company’s growth potential. However, he cautions that valuations are on the higher side, making it less ideal for short-term investors seeking substantial listing gains.
The IPO includes a fresh equity issue of Rs 365 crore and an offer for sale of approximately 4.12 crore shares. Under the offer for sale, founders Varun Alagh and Ghazal Alagh, along with investors Kunal Bahl, Shilpa Shetty, and Rishabh Mariwala, will partially offload their stakes.
The Honasa Consumer IPO allows investors to bid for a minimum of 46 shares in one lot and in multiples thereafter. The IPO allocation reserves approximately 75% for qualified institutional buyers, 15% for non-institutional investors, and the remaining 10% for retail investors. Employees of the company will benefit from a Rs 30 per share discount and an equity share reservation of up to Rs 10 crore.
StoxBox has expressed concerns about the IPO’s pricing, citing an aggressive valuation of 97x based on the annualized FY24 EPS. The high valuation raises questions about the company’s use of its strong track record to justify a premium valuation. They recommend an “Avoid” rating for the IPO.
Honasa Consumer, India’s largest digital-first beauty and personal care (BPC) company by FY23 revenue, operates six brands (Mamaearth, The Derma Co, Bblunt, Ayuga, Aqualogica and Dr Sheth), with Mamaearth as its flagship brand, contributing the most significant revenue.
Prashanth Tapse, Senior VP at Mehta Equities, suggests that conservative investors may opt to observe, while risk-takers may consider a long-term investment for potential growth. However, he notes that the Mamaearth IPO is overvalued in the current market condition, and historical listings with high valuations have encountered post-listing challenges.
The funds raised from the listing will serve several purposes, including advertising expenses, capital expenditure for establishing new exclusive brand outlets (EBOs), investments in the subsidiary BBlunt for opening additional salons, and general corporate requirements, along with potential unidentified inorganic acquisitions.
Kotak Mahindra Capital Company, Citigroup Global Markets India, JM Financial, and JP Morgan India are the appointed bankers for the issue.
In FY23, the company reported a loss of Rs 151 crore, a contrast to the Rs 14.4 crore profit recorded the previous year. However, the Delhi-based startup exhibited robust performance with a 58% increase in revenues, reaching Rs 1,493 crore during the same period.
For the recent June quarter, revenue from operations surged by 49% to Rs 464 crore, and the company reported a net profit of Rs 9.24 crore, marking an improvement compared to the Rs 2.51 crore loss in the corresponding period the previous year.