Mamaearth parent, Honasa Consumer gives 4% listing gains on debut day

• The stock listed at ₹334 as compared to its issue price of ₹324.
• The grey market was expecting 9% listing gains from the stock.
• Its marketcap is at ₹10,424 crore as per Bombay Stock Exchange.

Mamaearth’s parent Honasa Consumer made its D-street debut at a 3% premium on Tuesday morning. The stock listed at ₹334 as compared to its issue price on BSE.

The stock gained during the trading session, and closed the debut day with 4% listing gains.

The grey market is expecting 9% listing gains from the stock. Analysts pegged its listing price to be anywhere between ₹314-344.

Its marketcap is at ₹10,424 crore as per Bombay Stock Exchange.

Honasa’s initial public offer was subscribed 7.6 times the shares on offer – with good interest from institutional investors. But its retail book was just about fully subscribed with 1.3 times over the shares on offer.

The company raised as much as ₹765 crore from the anchor investors ahead of its IPO. Some of its investors include Abu Dhabi Investment Authority (ADIA), Goldman Sachs Singapore and more.

The listing of Honasa will be seen as an acid test for D2C companies in the public markets. On other hand, the listing gains of most IPOs have also tapered out with D-street giving mixed listing gains amidst volatile markets.

Here are the listing gains of the last few market debuts.


Might face post-listing challenges say analysts

A D2C company going public is a new IPO theme, but it’s also an acid test for such businesses in the public markets.

Honasa is one of the first-movers in the sector, and grew at a breakneck speed of 80% compounded annual growth rate (CAGR) for the last two years. In the crowded online BPC market, it managed to gain a market share of 5.4%, as per Redseer.

In addition to its flagship Mamaearth brand, it expanded its portfolio by incubating three brands and acquiring two more. It now has The Derma Co, Aqualogica, Ayuga, Dr Sheth’s and BBlunt (salons and products) – all catering to the new-age Indians who love tailor-made products.

Its ad expenses stood at 34.99% of its revenue from operations as of June end. Experts say that it’s normal for a D2C company like itself. A large chunk of the net proceeds raised from the fresh issue will go towards ad expenses. It intends to spend more towards physical presence like more EBOs and BBlunt salons.

“As the brand scales, the company is looking to connect consumers offline. A large part of the revenue decline is concentrated in its D2C website and app, where CAC (customer acquisition cost) is considerably high. As consumers shift to the offline mode, CAC needs will also reduce,” said a report by Emkay.

What’s in it for the investors?

The IPO is a combination of fresh issue and offer-for-sale (OFS). But the size of the fresh issue is much smaller than the OFS by promoters and other selling shareholders who will take a lion’s share of the intended fundraise of ₹1,701 crore.

“New investors should be cautious as the IPO includes fresh share issuance of ₹365 crore and a low promoter stake of 37.41%. Conservative investors may wait and watch, while risk-takers can consider long-term investment for potential growth. However, the IPO appears to be overvalued in the current market conditions, and historical listings with high valuations have often faced post-listing challenges,” opines Prashanth Tapse, senior VP of research at Mehta Equities.