While rebalancing does involve buying and selling, it is nevertheless part of a long-term, passive investing strategy—the type that performs best over time. In this essay, we’ll go over what rebalancing is and why, how often, and how to accomplish it.

Why Rebalance Your Portfolio?

Rebalancing your portfolio is the only way to stay on track with your goal asset allocation—the percentage of your portfolio held in different investments, such as 80% equities and 20% bonds. Your target asset allocation is the percentage you want to hold in each investment so that you’re comfortable with the amount of risk you’re taking and on pace to generate the investment returns you need to meet your goals, such as retiring by age 65.

The more stocks you own, the more risk you take on since your portfolio will be more volatile and its value will fluctuate with market fluctuations. However, equities beat bonds greatly in the long run, which is why so many investors rely on stocks rather than bonds to fulfill their objectives.

When the stock market performs well, the percentage of your portfolio’s monetary value represented by equities rises. If you start with an 80% allocation to equities, for example, it may climb to 85%, making your portfolio riskier than you expected. What’s the solution? Sell 5% of your stock holdings and use the proceeds to buy bonds. That is an example of balance.

When the market is performing well, rebalancing may be difficult psychologically. Who wants to sell a profitable investment? They might go higher, and you might lose out! Consider these three reasons:

They could fall farther, causing you to suffer more losses than you are comfortable with.

When you sell an investment that has been performing well, you are locking in those gains. They’re genuine; they don’t merely reside on a screen in your brokerage account. And when you acquire an investment that isn’t performing well, you’re getting a good deal. Overall, you’re selling high and purchasing low, which is exactly what every investor desires.

Rebalancing often entails selling only 5% to 10% of your portfolio. So, if the thought of selling wins and buying losers (in the short term) bothers you, at least you’re just investing a little portion of your money.

Of course, you do not have to rebalance. The more strongly your portfolio is weighted toward stocks, the greater your long-term returns are likely to be. However, they will not be significantly greater than if you had a more balanced asset allocation, and the increased volatility may induce you to make financially risky decisions, such as selling stocks at a loss.

It might make sense for a totally rational investor (which no one is) to invest entirely in equities. Holding some bonds and rebalancing often is the greatest approach to stay on track with your strategy and get the best risk-adjusted returns over time for anyone who has an emotional reaction to seeing their retirement account balance drop when the stock market struggles.

During the 2008 financial crisis, investors were forced to rebalance out of bonds and into equities.Buying equities that were falling in value may have looked risky at the time. However, those stocks were purchased at a significant discount, and the extended bull market that followed the Great Recession repaid those investors handsomely.

Those same investors should be rebalancing now. If not, they will have grown overly invested in equities and will suffer more than necessary the next time the market falls. Because markets are cyclical, it’s just a matter of time before their fortunes, whether good or bad, flip.

How Often Should You Rebalance?

There are three frequency at which you can rebalance your portfolio:

According to a predetermined schedule, such as once a year during tax time.

When your desired asset allocation deviates by a given percentage, such as 5% or 10%.

Within a specified term, but only if your target asset allocation has deviated by a specific percentage (a mix of both options).

The disadvantage of the first strategy is that you may squander time and money (in the form of transaction fees) rebalancing inefficiently. There’s no purpose in rebalancing if your portfolio is only 1% out of sync with your strategy.

To determine how frequently to rebalance, you’ll need to decide how much drift you’re OK with—how far you’re comfortable allowing your asset allocation stray from your target. In other words, if your target allocation is 60% stocks and 40% bonds, do you want to rebalance when your portfolio has drifted to 65% stocks and 35% bonds, or are you content to wait until it has reached 70% stocks and 30% bonds?

As it turns out, you may not even need to worry about when or how frequently to rebalance. A Vanguard analysis that spanned the years 1926 to 2018 indicated that “no specific rebalancing frequency and/or threshold is optimal for all investors.” According to Vanguard’s results, someone who rebalanced monthly would have nearly 1,000 rebalancing occurrences, while someone who rebalanced quarterly would have 372 and someone who rebalanced annually would have only 93. Nonetheless, the average annualized return and volatility were essentially comparable among the three groups.

 Vanguard suggests reviewing your portfolio every six months and rebalancing at a 5% threshold to get the optimal balance of risk management and expense minimization.

Taking it a step further, the Vanguard study discovered that you should never adjust your portfolio. On average, someone who started with a 60% allocation to stocks would end up with an 85% allocation to equities.

This person would not have spent any time or money rebalancing. Their portfolio’s volatility was around 2.5 percentage points higher than that of an investor who did rebalance. And their average annualized returns were 8.74%, compared to 8.20%, 8.26%, and 8.19% for the hypothetical investors who rebalanced monthly, quarterly, and annually, respectively.

Another time to consider rebalancing is when your life situation changes in a way that affects your risk tolerance, such as the following:

Married a Multimillionaire?

You can safely switch to a more cautious asset allocation strategy. If you and your spouse handle your existing assets carefully, you could be set for life.

Became Disabled or Seriously Ill?

Again, you may want to rebalance into something more conservative because you want to be able to use the money you have left throughout your remaining time. You’ll also require funds for medical expenses sooner rather than later.

Divorcing and Not Responsible for Child Support or Alimony?

With no one to provide for but yourself, you may decide to rebalance into a bigger percentage of equities because your risk-taking will have no impact on your family.

Planning To Buy a House in the Next Few Years?

You should rebalance your portfolio into more bonds and fewer equities so that you have plenty of cash to remove when you’re ready to withdraw your down payment, even if the market falls.

Let’s speak about how to rebalance now that we’ve covered what it is and why you should (probably, maybe) do it.

Look at Your Overall Portfolio

To gain a whole view of your investments, you must examine all of your accounts together, not just individual accounts. If you have a 401(k) and a Roth IRA, you’re probably curious about how they interact. How does your whole portfolio look? Obviously, if you only have one investing account, you may skip this step.

Use one of these three approaches to create a consolidated view of all your investment accounts.

1. Spreadsheet

Input each of your accounts, each of your investments within those accounts, and how much money you have in each investment on a single sheet. Take note of whether each investment is a stock, bond, or cash holding, and then compute the proportion of your overall holdings that is assigned to each category. This isn’t the simplest or quickest technique, but it could be entertaining if you’re a personal finance nerd who enjoys creating spreadsheets.

Next, compare your holdings’ allocations in each category to your intended allocation. If you have any target-date funds or balanced funds that include both stocks and bonds, check the website of the company that offers those funds (e.g., Fidelity, Vanguard, Schwab) or a research site like Morningstar, which we used to create the spreadsheet below, to see how they’re allocated.

*0.89% of VBMFX’s asset allocation is listed as “not classified.”
Thanks to MoneyUnder30.com for the basic format of this spreadsheet.

2. Brokerage Software

Some brokerage firms allow consumers to view all of their investments in one spot, not just those held with that brokerage. Merrill Edge Asset Allocator and Fidelity’s Full View are two examples.

You must provide your login information for each account whose details you wish to access. If you use Fidelity’s Full View and have a self-employed 401(k) with Fidelity and a Roth IRA with Vanguard, you’ll need to give Fidelity your Vanguard login information so you can see the combined asset allocation of your two accounts.

3. Apps

Apps like Empower Personal Dashboard, SigFig’s Portfolio Tracker, FutureAdvisor, and Wealthica (for Canadian investors) can integrate with your existing accounts to provide a complete picture of your investments that is routinely updated.

These apps are available for free, with the hope that you will sign up for one of the company’s commercial services, such as portfolio management. To see your combined asset allocation, you’ll need to give these sites with the login information for your brokerage accounts.

If you don’t want to share your login information between sites or don’t think finding a way to check your total portfolio is too much work, here’s another option: Maintain your intended asset allocation across all of your accounts. Check that your 401(k) and individual retirement account (IRA) have the appropriate percentages of equities and bonds. Then, when needed, rebalance each account.

Analyze Your Portfolio

Once you have a complete view of your portfolio holdings, examine these four things:

1. Overall Asset Allocation

How much of your money is in stocks, bonds, and cash, and how does it compare to your desired allocation?

 Pay close attention if you own Berkshire Hathaway stock. While officially a stock, it has significant cash and bond assets. If the software you’re using isn’t clever enough to recognize this, you may have to undertake some manual asset allocation calculations.

2. Overall Risk

Could you handle the level of risk if your portfolio consisted of 70% equities and 30% bonds? Do you not think you are taking enough risk if you end up with 20% cash, 30% bonds, and 50% equities to achieve your investment objectives?

3. Overall Fees

You would ideally like your investment costs to be as near to zero as feasible, and thanks to rising innovation and competition in the investing business, you may be able to reach this aim. The yearly cost ratio for the Fidelity Total Market Index Fund (FSKAX) is 0.015%.

All else being equal, the higher your investing expenses, the lower your returns. Loads for purchasing and selling mutual funds, as well as commissions for buying and selling equities and exchange-traded funds (ETFs), are other expenses to be aware of. Loads and commissions may cost less over time than annual expense ratios for long-term buy-and-hold investors.

4. Returns

Are the returns on your portfolio fulfilling your expectations? If they aren’t, that’s not necessarily a bad thing: what matters most are the long-term average yearly returns. That is why you should compare the performance of your portfolio’s investments to similar ones.

Is your stock market fund tracking the index it claims to be tracking? You may find this information on Morningstar, which has set acceptable benchmarks for various funds and developed color-coded graphs to indicate how your fund has done in comparison to its benchmark.

Another option is that your portfolio’s asset allocation is incapable of meeting your objectives. If your goal is to generate an 8% average annual return and your portfolio is made up of 80% bonds and 20% stocks, you have basically no chance of meeting it until you change your asset allocation to 80% equities and 20% bonds.

 If you find yourself with an overwhelming number of accounts at this point—for example, many 401(k) plans with various prior employers—consider consolidating them. Old 401(k) balances can be transferred to an individual retirement account (IRA).

Depending on the type of 401(k) you have or whether you’re prepared to pay taxes to transfer to a Roth, the old plans might be traditional or Roth. The IRA switch provides you with complete control over your fees and investments. You can also roll your prior 401(k) balances into your current 401(k) if you enjoy your current employer’s 401(k) and your current employer allows it.

 It is worth noting that 401(k) funds are more protected from creditors.

Learn What’s New

What you already have may not be the ideal alternative for achieving your goals in light of investment innovation. For instance, you may be holding an index ETF that is almost comparable to your mutual fund but has a lower fee ratio, say, 0.05%.

Is there any way this could be real? How is it possible to get an investment that is practically the same for a lot less money? Few exchange-traded funds (ETFs) impose 12b-1 (marketing) or sales burdens, in contrast to certain mutual funds. In addition, exchange-traded funds (ETFs) are not often actively managed by human fund managers who choose winners and losers; rather, they are passively managed, investing in all the stocks that make up an index. In part because of the reduced fees, passive management is more cost-effective and often produces superior results.

One more option is to transfer your funds to a robo-advisor. This can help you save money on fees and take care of all your investment management needs. A little later on in this piece, we go into further detail on robo-advisors.

What Should You Sell vs. Buy?

Finding out which investments to sell off is the next step. Your main objective should be to unload assets that are overweight. Your intended asset allocation may have become skewed toward stocks if stock prices have been outpacing bond prices. If you want to have a 70% stock and 30% bond portfolio, you should be holding 25% bonds and 75% equities. If that’s the case, you should consider selling 5% of your shares.

Which stocks, including stock mutual funds and stock ETFs, should you sell? Start with these:

• Excessive fees on stock funds
• You don’t understand stock funds.
• Stocks of firms whose business model you are unfamiliar with
• Stocks and mutual funds that are either too risky or not risky enough for your risk tolerance
• Stocks and funds that haven’t outperformed their benchmarks or what you anticipated them to.
• Individual stocks that are overpriced, underperforming their counterparts, or do not have a favorable outlook

If it’s bonds you’re looking to sell, consider these criteria:

• Bonds with a lower credit rating (the risk associated with these bonds has increased since you bought them).
• Bonds that are underperforming their benchmarks
• Investing in bonds whose returns are falling behind inflation
• Bond funds whose fees are excessively expensive, when a similarly sized fund may be obtained for a lower price.

If you don’t have any of these characteristics, sell the investment with the lowest trading fee, such as shares in a no-transaction-fee mutual fund or ETF.

You’ll have to wait for your sales to settle before you can make fresh investments. The time it takes for your sale to be finalized and your cash proceeds to appear in your account varies based on the type of investment purchased or sold.

Most traditional security transactions settle in two business days, which is referred to as T+2 in industry jargon—T is the day of the exchange, and the 2 denotes two business days. Remember that if you place a trade after the market closes, it will not be performed until the next business day.

Decide what you wish to buy while your sales are settling. The most straightforward solution is to purchase more of what you already have that you are underweight in. Examine your investment again and ask yourself, “Would I buy it today?” If not, look for a different investment that corresponds with your objectives.

Portfolio Rebalancing by Age/Goals

Portfolio rebalancing isn’t really affected by your age or what you’re attempting to accomplish with your portfolio. But, because asset allocation is the first step toward portfolio rebalancing, let’s talk about how you might allocate your portfolio at different points in your life.

Age 25

You’ve probably heard that young investors should invest a large portion of their money in equities because they have a lengthy time horizon and stocks tend to perform the best over time. However, your appropriate asset allocation is determined not just by your age, but also by your risk tolerance. If a 10% decrease in the stock market causes you to panic and sell equities, you have a lower risk tolerance than someone who sees the same loss as a purchasing opportunity.

This brief Vanguard risk tolerance questionnaire might assist you in determining your risk tolerance and determining how to deploy your portfolio. A simple formula such as 100 minus your age to calculate the percentage of your portfolio to allocate to equities (75% for a 25-year-old) may be a good starting point, but you’ll need to adjust that percentage to fit your investment personality. If you have a high risk tolerance and a lengthy time horizon, you can invest entirely in equities.

According to the Vanguard analysis, with a hypothetical portfolio invested from 1926 to 2018, average annualized returns might be as low as 5.4% for someone invested entirely in bonds and as high as 9.5% for someone investing entirely in stocks.

However, the difference between investing 100% in stocks vs 80% in stocks and 20% in bonds was only a percentage point, with the latter gaining 8.7% on average. Meanwhile, someone who invested 70% in stocks and 30% in bonds would have made 8.2%, while someone who put 60% in stocks and 40% in bonds would have received 7.8%.

What we can learn from these findings is the necessity of investing in something tried and true; perhaps don’t put 100% or even 20% of your portfolio into Bitcoin, which is still considered highly speculative.

Because most people are more unhappy when they lose money in the stock market than they are when they gain money in the stock market, the best plan for you is one that makes you comfortable with the level of risk you’re taking and helps you stay the course during market declines. So, if you’re 25 years old and constantly hearing that you should put 80% of your money in equities, you don’t have to. It’s acceptable if you simply want to invest 50% in stocks and retain the other 50% in bonds.

Age 45

You may have gotten an inheritance from a parent or grandparent at this stage in your life and are wondering what to do with the money and how the windfall should impact your investment strategy. Another scenario that many individuals encounter around the age of 45 is the need for money to send a child to college—tens of thousands, if not hundreds of thousands, of dollars if you have many children or a private school-bound child who did not obtain financial help.

If you inherit assets like stocks, you must determine how they fit into your entire portfolio and rebalance accordingly. With more money, you may prefer a more conservative allocation because you don’t need to take on as much risk to attain the growth you require.

If you inherit a large number of stocks, you may need to sell a large number of them and replace them with bonds. Or maybe you inherited a lot of bonds and want to invest in more equities. You should also consider whether the assets you’ve inherited are the kinds of items you’d acquire if you were investing your own money. And if you inherit cash, you may simply use it to buy the stocks and bonds you need to build your desired asset allocation.

Let’s imagine you have a 529 plan, which is a tax-advantaged account that helps families save money for educational expenses. You can utilize an aggressive asset allocation with a high percentage of stocks when your child is 10 years or more away from college. As your child approaches college age, you should rebalance to make your asset allocation more conservative. Invest account contributions in bonds rather than equities.

Over time, the account’s value should grow less volatile and more stable, allowing you to withdraw funds for your child’s education without having to sell investments at a loss. Some 529 plans also provide age-based options that function similarly to target-date retirement funds but with a shorter time horizon associated with having children and paying for education.

Also, at 45, if you’ve been extremely successful and have kept a close eye on your expenditures, you could be on pace to retire early. If this is the case, you may need to begin rebalancing your portfolio toward a more conservative asset allocation. However, you may not want to—it all relies on your mindset about stock ownership during retirement, which is determined by your risk tolerance.

Your portfolio is deemed to be in the transition stage if you are 0 to 10 years away from retirement. Most experts agree that you should shift your asset allocation toward bonds rather than stocks—but not too much, because you still need continuing growth to ensure that you don’t outlive your portfolio.

Instead of the 40% bond and 60% stock asset allocation that may be recommended for someone aiming to retire at 65, consider a 50/50 allocation. When you rebalance, you will sell equities and buy bonds.

Age 65

Age 65 signifies the beginning of retirement, at least for those who can afford to stop working. For people born between 1943 and 1954, the full Social Security retirement age is 66, while Medicare begins at 65. In any case, you’ll be thinking about withdrawing retirement plan assets for income at this point in your life, give or take a few years.

At this age, rebalancing your portfolio may imply selling equities to gradually shift your portfolio toward a higher bond composition as you get older. The one caveat is that you don’t want to sell equities at a loss; which investments you sell for income will be determined by what you can sell for a profit.

Diversification within each major asset class (for example, holding both large-cap and small-cap stock funds, international and domestic stock funds, and government and corporate bonds) increases your chances of always having assets to sell at a profit.

A retirement drawdown strategy should also be in place. Perhaps you’ll withdraw 4% of your portfolio balance in year one and adjust that amount by the inflation rate each year after that. Because you’re now accounting for regular withdrawals, portfolio rebalancing will demand a different method than before retirement, when you were simply (or largely) accounting for contributions.

You may also be withdrawing from various accounts, which may need rebalancing many accounts. To avoid tax penalties, you must begin taking required minimum distributions (RMDs) from 401(k)s and traditional IRAs at the age of 73 if you were born between 1951 and 1959, or 75 if you were born in 1960 or later.

You can rebalance your portfolio by selling an overweight asset class when you take RMDs. Keep in mind that unless it’s a Roth account, you’ll have to pay taxes on earnings withdrawals and pre-tax contributions.People with considerable assets outside of retirement funds might rebalance in a low-cost, tax-efficient manner by donating appreciated investments to charity or transferring low-basis shares (stock shares with significant capital gains on their initial value) to friends or relatives.

Now that you understand how the rebalancing process works, the next question is whether you should do it yourself, employ a robo-advisor, or seek the assistance of a genuine, live financial advisor. Consider the advantages and disadvantages of each in terms of skill, time, and money.

DIY Portfolio Rebalancing

Rebalancing your portfolio on your own, without the assistance of a robo-advisor or financial advisor, costs nothing. What it does cost you is time, and how much time depends on the intricacy of your assets and your understanding of how to rebalance. If you have one IRA with one stock ETF and one bond ETF, rebalancing will be quick and simple. The work becomes increasingly difficult as the number of accounts and funds increases.

The most typical rebalancing recommendation is to sell the investments you’re overweight in (which will nearly always be stocks, because equities grow faster than bonds, as previously explained) and use the proceeds to buy the investments you’re underweight in (which will almost always be bonds). However, a simpler way that may result in cheaper transaction costs is to use any fresh contributions to your account to acquire the investments you require more of.

If you receive a year-end bonus, a tax return, or a substantial gift, put it to good use. If you make a one-time donation to your IRA, divide it evenly between stocks and bonds to rebalance your account.

You may not wind up completely reallocating your investments back to your desired ratio, but you may get close enough to avoid incurring any transaction expenses from selling. However, many brokerage firms provide no-transaction-fee mutual funds and ETFs, so you won’t pay anything to purchase and sell exactly what you need.

The major hazards of DIY portfolio rebalancing are not doing it at all and, if you’re working with a taxable account, incurring taxes—especially short-term capital gains taxes, which have a greater rate than long-term capital gains taxes. Anytime you pay investment taxes, you reduce your net returns.

To summarize, here’s an example of how this whole process works.

Allocation before rebalancing:

• Stock mutual fund value: $7,500 (75% of your portfolio)
• Bond mutual fund value: $2,500 (25% of your portfolio)

To rebalance:

• Sell: $500 of the stock mutual fund
• Buy: $500 of the bond mutual fund

Allocation after rebalancing:

• Stock mutual fund value: $7,000 (70% of your portfolio)
• Bond mutual fund value: $3,000 (30% of your portfolio)

One factor that could make this process more difficult is if the bond mutual fund you intend to invest in has a minimum investment of more than $500. If this occurs, you might buy shares of a virtually equivalent bond ETF with no investment minimum.

Furthermore, if you have to pay commissions to buy or sell, your entire portfolio value will fall below $10,000.

Automatic Portfolio Rebalancing

The simplest method to rebalance your DIY portfolio is to invest in funds whose managers conduct the rebalancing for you. Target-date funds, which are mutual funds that contain a basket of investments and have an asset allocation depending on your expected (target) retirement date, are an example of an automatically rebalanced fund. You are under no obligation to do anything.

A fund for investors with a goal retirement date of 2040, for example, might have a starting asset allocation of 90% stocks and 10% bonds. The fund’s managers will rebalance the fund as needed to maintain the target allocation. Furthermore, they will adjust the fund’s asset allocation over time, making it more conservative through 2040. According to Morningstar, the industry average for these funds in 2022 was 0.32%.

What about balanced mutual funds? These are similar to target-date funds in that they hold both stocks and bonds and aim to maintain a specified allocation, such as 60% equities and 40% bonds. That allocation, however, does not alter with time; balanced funds are appropriate for investors of all ages.

Robo-Advisor Rebalancing

Working with a robo-advisor needs almost little effort or talent on your part because the robo-advisor handles all of the work for you. All you have to do is open an account, deposit funds, and specify your ideal asset allocation or answer the software’s questions to help it set one for you.

Costs are also low. Betterment, Wealthfront, and SigFig use ways to reduce the cost of rebalancing by avoiding or lowering short- and long-term capital gains taxes. When rebalancing your portfolio, one popular method is to avoid selling any stocks. Instead, when you deposit money or receive a dividend, the robo-advisor uses it to buy more of the investment in which you are underweight.

If, for example, your portfolio has shifted from 60% stocks to 40% bonds to 65% stocks to 35% bonds, the robo-advisor will utilize your deposit to buy more bonds the next time you add money to your account. You avoid any tax repercussions by not selling any investments. This is known as cash flow rebalancing

You can use this approach to save money on your own, but it only works in taxable accounts, not in retirement accounts like IRAs and 401(k)s. When you buy or sell investments within a retirement account, there are no tax ramifications.

Another approach used by robo-advisers to keep transaction costs down is to sell whichever asset class you are overweight in whenever you remove money from your account.

Furthermore, when your robo-advisor rebalances your portfolio, you will not suffer the commissions, transaction, or trading fees that you would if you did it yourself or through an investing advisor. These fees are not levied by robo-advisers. They instead charge an annual fee based on the value of the assets they manage for you.

Betterment, for example, charges a 0.25% annual fee on assets under management (AUM), with no minimum account amount. Because robo-advisors are automated, they may rebalance your portfolio as frequently as daily, ensuring that it is always in near-perfect balance.

Hiring an Investment Advisor

Portfolio rebalancing is one of the duties that someone who manages your assets will accomplish for you, along with designing an investment plan based on your goals and risk tolerance and proposing investments to help you meet those goals.

You can undoubtedly manage your investments and rebalance your portfolio on your own. However, some people lack the time, lack confidence in their abilities to learn what they need to know and complete the necessary activities, or simply do not want to deal with it. Others understand how to manage their own assets but make emotional decisions that reduce their profits. Hiring an investing advisor may be beneficial if you fall into one of these groups.

Hire a Fee-Only Fiduciary

This type of expert does not have any conflicts of interest, which prevents them from operating in your best interests. They are compensated based on the amount of time they spend assisting you, not on the specific investments they sell you or the number of trades they execute on your behalf.

When selecting a fee-only fiduciary, use the Financial Industry Regulatory Authority’s (FINRA) BrokerCheck website and the Securities and Exchange Commission’s Investment Adviser Public Disclosure website to investigate their background. You may be able to verify the background of an advisor at one, both, or neither of these websites, depending on the sort of advisor.

If they appear in one of these databases, you can view their job history, tests passed, credentials earned, and any disciplinary actions or consumer complaints they have received. You can also check an advisor’s credentials with the certifying organization on occasion. On the CFP Board’s website, for example, you may confirm an individual’s certified financial planner credentials and background.

Cost Is the Biggest Drawback

The industry average cost per asset handled per year is roughly 1.0%. So, if your portfolio is worth $50,000, you will pay your advisor approximately $500 every year. You will also be responsible for any commissions and costs related with the investments in your portfolio. Any expenses, including those charged by an investment advisor, will affect your overall results.

Some consulting services strive to outperform the industry norm. Vanguard states that a $250,000 investment using the company’s Personal Advisor Services, which costs only 0.35% of assets under management each year, would result in quarterly fees of $218.75, compared to an industry average of $625.

An Advisor’s Fee Can Pay For Itself

Investors get lesser returns than the funds in which they invest because they prefer to sell cheap and purchase high. A financial advisor’s behavioral coaching can help you overcome this issue. Working with an advisor can help you stay on track, especially during bull or bear markets when your emotions may entice you to abandon your long-term investing strategy.

According to a Vanguard study published in June 2020, advisors may boost their customers’ average annual returns by 3% by financial planning, discipline, and coaching rather than by outperforming the market

Another reason to employ an investing advisor is if it will be the difference between having an investment plan and doing nothing. The latter is detrimental to your long-term financial health.

You don’t have to hire someone on an ongoing basis; you can hire someone on a project or hourly basis. Not all advisors work in this manner, but many do. And you may employ someone from anywhere in the country and communicate with them online, via Skype, or by phone.

 Some bank and brokerage staff and services may be compensated with commissions on the investments you purchase, creating a conflict of interest that may prevent them from recommending your best selections.

Of course, there are drawbacks to employing an advisor, such as the fact that many of them have investment minimums. You may not have enough assets for certain advisors to accept you as a client. Some services require at least $500,000 in investment.

The amusing thing about employing an advisor to rebalance your portfolio is that they will almost certainly use an automatic asset rebalancing tool (in other words, software). This software takes into account the investor’s risk tolerance, tax goals (such as tax-loss harvesting and avoiding capital gains and wash sales) in the case of a taxable portfolio, and asset location (whether to hold certain investments in a nontaxable account such as a 401(k) or in a taxable brokerage account).

Yes, it’s pricey, complicated software that you wouldn’t buy on your own. However, robo-advisors use the software as well. Why not just employ a robo-advisor?

A Vanguard study published in May 2013 that examined 58,168 self-directed Vanguard IRA investors over the five years ending Dec. 31, 2012, discovered that investors who made trades for reasons other than rebalancing—such as reacting to market turbulence—performed worse than those who maintained the course.

If robo-advising does not prevent you from buying high and selling low, paying an individual investment advisor to ensure you stick to your investing strategy can be beneficial.

The Bottom Line

Since everything is fresh, rebalancing your portfolio for the first time could be the most difficult. However, it’s a smart habit to get into and a talent to acquire. Its primary purpose is to improve your risk-adjusted returns, not your long-term returns.

Because it helps them stick to their long-term investment plan and prevents them from freaking out when the market goes south, most individuals think that rebalancing is a good way to take a little less risk. Therefore, increasing your long-term returns is possible through the discipline of rebalancing.

The post How To Adjust and Renew Your Portfolio appeared first on Republic Aeon.

The offer’s anchor book will be open for a day on December 12, and the issue will end on December 15.

The IPO consists of a fresh issue of Rs 350 crore in shares by Doms and an offer-for-sale (OFS) of Rs 850 crore in shares by the promoters. This means that 70% of the funds will go to selling stockholders.

The corporate promoter, FILA- Fabbrica Italiana Lapised Affini SpA, will sell Rs 800 crore worth of shares in the OFS, with an average cost of acquisition of these shares of Rs 101.53 apiece.

The OFS will be sold by promoters Sanjay Mansukhlal Rajani and Ketan Mansukhlal Rajani for Rs 25 crore apiece.

FILA, an Italian business, owns 51 percent of the corporation, with Santosh Rasiklal Raveshia, the second largest stakeholder among promoters, owning 17 percent.

According to the red herring prospectus filed on December 2, Sanjay Mansukhlal Rajani and Ketan Mansukhlal Rajani each own 8.63 percent of the company, while Chandni Vijay Somaiya, Sejal Santosh Raveshia, and Sheetal Hiren Parpani each own 4 percent.

Doms, which has a market share of 29 percent and 30 percent in core products such as pencils and mathematical instrument boxes in FY23, will use net fresh issue proceeds to build a new manufacturing facility to expand production capabilities for a wide range of writing instruments, water color pens, markers, and highlighters. The remainder of the monies will be used for general corporate reasons.

The sale includes a reserve of up to Rs 5 crore in shares for firm personnel. The net issue is the IPO minus the employee part.

The Gujarat-based company, which sells stationery and art products primarily under its flagship brand DOMS, has set aside 75% of the net offer size for qualified institutional buyers, 15% for high net worth individuals (non-institutional investors), and 10% for retail investors.

Doms, the second largest player in India’s branded stationery and art products market by value in FY23, has clocked healthy financial performance in recent years, with net profit increasing 567.2 percent year on year to Rs 95.8 crore for the fiscal year ended March FY23, revenue from operations increasing 77.3 percent year on year to Rs 1,212 crore, and EBITDA (earnings before interest, tax, depreciation, and amortisation) rising 149% year on year to Rs 186.7 crore EBITDA margin increased dramatically to 15.4 percent in FY23, up from 10.96 percent in FY22.

Also read :- Govt likely to miss target of flying 30 lakh beneficiaries under UDAN Scheme in FY24

The company reported a net profit of Rs 70.63 crore on revenue of Rs 761.8 crore for the six-month period ending September FY24.

After closing the public issue on December 15, the firm in consultation with the BSE will finalise the basis of allotment of IPO shares by December 18, while equity shares will be credited to demat accounts of successful investors by December 19.

The trading of equity shares on the NSE and BSE will begin on December 20.

The issue’s merchant bankers are JM Financial, BNP Paribas, ICICI Securities, and IIFL Securities, while the registrar is Link Intime India.

The post Doms Industries to launch IPO on Dec 13 to raise Rs 1,200 cr appeared first on Republic Aeon.

The initial public offering (IPO) consists of two parts: the company’s new share issuance of Rs 250 crore, and the promoters’ offer-for-sale (OFS) of same amount.

In the OFS, Sudhir Rai, a promoter, and Anita Rai, a co-promoter, will sell shares valued at Rs 168 crore and Rs 82 crore, respectively.

The Jharkhand-based manufacturer of machined and forged components is also exploring the possibility of obtaining Rs 50 crore through pre-IPO placement. In the event that the proposed pre-IPO placement goes through, the size of the new offering will be lowered to Rs 50 crore.

Net proceeds from the fresh issuance would be used by the company to pay for working capital needs amounting to 30 crore rupees and machinery and equipment worth 70 crore rupees. New issue proceeds would also be used to cover debts of Rs 90 crore, with the remaining money being set aside for general corporate reasons.

For the fiscal year ending in March of FY23, the profit increased by 154.2 percent year-on-year to Rs 30.93 crore, led by solid topline and operating metrics. The Rai family promotes the company, which serves the M&HCV and farm equipment businesses.

Within the last fiscal year, operational revenue increased 64.3% year-on-year to 488.6 crore rupees. EBITDA, or earnings before interest, taxes, depreciation, and amortisation, surged by 95% to Rs 57.5 crore during the same time, resulting in a margin expansion of 184 basis points at 11.77 percent for the year.

Also read :- GST collections in November at Rs 1.68 lakh crore, up 15% YoY

This fiscal year’s first quarter saw sales of Rs 143.7 crore and a profit of Rs 8 crore.

Ashok Leyland and Tata International DLT are just two of the prominent original equipment manufacturers (OEMs) with whom Kross has maintained steady partnerships for many years.

The merchant banker for the offering is Equirus Capital.

The post Kross files draft papers with Sebi to raise Rs 500 crore via IPO appeared first on Republic Aeon.

The last small finance bank to make its debut on the secondary market was Utkarsh Small Finance Bank in July 2023. By listing at a premium of roughly 52%, it generated spectacular returns for its backers. Another small finance bank IPO, ESAF Small Finance Bank IPO, will hit the D-street on Friday, 3 November 2023 as we enter the penultimate month of this year.

A household name in the banking industry of India is ESAF Small Finance Bank. The bank has become well-known for its commitment to helping the underprivileged gain access to banking services. Explore the financials, strengths, weaknesses, issue size, projected listing date, and other facts of the ESAF Small Finance Bank IPO by reading on.

An Overview of ESAF Small Finance Bank

ESAF Small Finance Bank is a microfinance institution in India that caters to the needs of the country’s rural poor who lack access to traditional banking services. Debit cards, credit cards, mobile banking, microloans, MSME loans, retail loans, financial institution loans, and agricultural loans are all part of the bank’s offerings. South India, particularly the states of Tamil Nadu and Kerela, is where the majority of these services are provided.

As of 30 June 2023, ESAF Small Finance Bank has an extensive branch and ATM network consisting of 700 locations. Additionally, the bank has 767 customer care centers, 22 business correspondents, 2116 banking agents, 525 business facilitators, and 559 automated teller machines. More than 7.15 million Indians in 21 states and 2 union territories can take advantage of the service.

Key Strengths of the Company

ESAF Small Finance Bank identified many positives in its Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI). They are as follows:

• It has a thorough understanding of its target audience, which is India’s unbanked or underbanked populace.
• It has emerged as a key player in the microloan market.
• Banking franchise presence in both rural and semi-urban locations
• The technology-driven business model has boosted expansion and penetration.
• With customer-centric products and a strong support system, it is able to keep the majority of its clients.

Key Risks or Weaknesses Highlighted

ESAF Small Finance Bank has the following risks or vulnerabilities (as mentioned in the DRHP):

• Most of India’s economic activity is located in the southern states of Kerala and Tamil Nadu. The company needs to expand into new areas.
• The Reserve Bank of India (RBI) mandates its compliance. This compromises its capability to operate on its own.
• Non-Performing Asset (NPA) can be a problem. Loss of income owing to unpaid bills from clients.
• Repo rate rises and other policy moves by the RBI carry risks.

Core Financials of the Compan

The financials of a business can be examined for clues as to how successful it will be in the future. Here are the headline numbers for the last three full fiscal years at ESAF Small Finance Bank IPO. Information is as published on the SEBI website in the RHP dated October 28, 2023:

*Amount in Crores

The accompanying table shows that the company has had consistent growth over the past three fiscal years. Income, however, has been highly inconsistent on account of interest rate swings and nonperforming assets. In the coming years, the company will be a major player if it can keep its NPAs under control and expand into new markets.

Details of the IPO

On Friday, November 3, 2023, the public subscription period for shares of ESAF Small Finance Bank will commence, and on Tuesday, November 7, 2023, it will close. There would be a new share issue of Rs. 390.70 cr and a secondary sale of Rs. 72.30 cr in this transaction. Details about the IPO are listed in the table below.

Also read :- Top Stock Picks: Diwali Muhurat Trading 2023

To conclude

In India, ESAF Small Finance Bank is a household name. But before investing in an IPO, make sure you undertake thorough research and consult a financial expert.

The post ESAF Small Finance Bank IPO: Check Issue Size, Date and Price Band appeared first on Republic Aeon.

The offering is totally made up of 61.91 lakh shares for sale. The whole profits, excluding IPO fees, will be distributed to selling shareholders, and the firm will get no compensation from the offer.

Anchor Investors

Prior to the IPO, the creator of e-governance solutions received Rs 143.5 crore from anchor investors. Through the anchor book, prominent names such as SBI Life Insurance, Baroda BNP Paribas Mutual Fund, Aditya Birla Sun Life Insurance Company, LIC Mutual Fund, and Societe Generale invested in the company.

Financial Performance

Protean eGov-Tech’s net profit declined 25.6 percent to Rs 107 crore in FY23, from Rs 143.9 crore the previous year, owing to a major increase in labor costs and reduced other incomes. PAT margin fell from 20.8 percent to 14.4 percent. Revenue from operations, on the other hand, increased by 7.4 percent to Rs 742.2 crore from Rs 690.9 crore during the same period.

Along with net profit, return ratios dropped in the fiscal year ending March 20, 2023. RoE (return on equity) fell to 12.5% in FY23 from 18.3% in FY22, while RoCE (return on capital employed) fell to 13.6 percent from 20.4 percent in the same time.

Key Concerns

The company’s revenue is heavily reliant on e-governance and other contracts awarded by government agencies. The costs it can charge for e-governance services are determined by suggested or mandatory fees stipulated in agreements with national or state governments.

Should you invest in Protean eGov Technologies’ initial public offering? Let’s have a look at the brokerage perspectives.

Choice: Subscribe

At the highest price band, the company is demanding a TTM P/E multiple of 27.2x, which is lower than the peer average of 42.5x. “Considering the dominant position in the domestic e-governance market, its capabilities to roll out nationally critical and population-scale greenfield technology solutions and attractive demanded valuations, we assign a ‘Subscribe’ rating for the issue,” according to analysts from Choice Equity Broking.

Reliance Securities: Subscribe

Reliance Securities analysts believe Protean eGov is a secure, scalable, and advanced technology platform with horizontal and vertical scalability, consistent profitability, positive cash flows, and limited capital expenditure and working capital required to scale growth in its key areas. As a result, the brokerage suggests a’subscribe’ rating for the offering.

Canara Bank Securities: Subscribe

Protean has expanded strategically across the digital and e-governance ecosystems. “Protean has a strong balance sheet and cash flow as a niche player with strong growth potential and market leadership.” Canara Bank Securities experts propose subscribing for listing profits and long-term advantages.

Also read :- Top SIP Investment Mistakes You Must Avoid

BP Equities: Subscribe

The higher price band represents a fair valuation of the issue at a P/E of 29.9x on FY23 profits. The issue has been given a ‘Subscribe’ recommendation by BP Equities’ research team.

Moneypoise.com’s investment gurus give their own opinions and advice, not that of the website or its administration. Moneypoise.com recommends that customers seek the advice of professionals before making any financial commitments.

The post Protean eGov Tech floats Rs 490.33-cr IPO: Should you buy into the issue? appeared first on Republic Aeon.

The primary market has recently been a hive of activity, with a spate of firms from diverse industries going public in order to generate funds and provide chances for interested investors. Honasa Consumer IPO is one such Initial Public Offering (IPO) that has received a lot of attention.

This article delves into the specifics of this highly anticipated IPO, including the background of the issuing company, financials, the IPO listing date, lot size, price band, and more.

About Honasa Consumer Limited

Varun and Gazal Alagh, a married couple, established Honasa Consumer Limited in 2016. A leading distributor of cosmetics and personal care items in India, the company operates both online and in brick-and-mortar stores. Famous companies including Mamaearth, Aqualogica, The Derma Co., Dr. Sheth’s, and Ayuga all fall under its umbrella.

RedSeer found that Honasa Consumer Limited, an Indian direct-to-consumer seller of cosmetics and personal care products, generated the most income in the country. As of 30 June 2023, the company sells products across a variety of categories, including those for babies, adults, and everyone in between.

Both Bhabani Blunt Hairdressing Private Limited (BBLUNT) and Momsspresso, a content platform, are recent investments for the firm.

Key Strengths of the Company

The following are Honasa Consumer Limited’s core strengths, as stated in its Draft Red Herring Prospectus (DRHP) submitted with the Securities and Exchange Board of India (SEBI):

Capability to use the power of digital marketing to reach a large and engaged audience

Commitment to producing products with natural and eco-friendly ingredients

A track record of successfully expanding product portfolios from baby care to skin care, hair care, and more.

Attracts new generations to a greener environment through sustainable and responsible behaviors.

It is well-known for its ability to establish brands through data-driven contextualized marketing.

A market leader in natural onion and ubtan-based beauty products.

Key Weaknesses or Risks Highlighted

The key risks or weaknesses associated with Honasa Consumer Limited include:

• Failure to recognize and respond to changing consumer tastes may result in a drop in sales.
• The strategy of launching new items may not always be successful.
• The sale of specific products contributes significantly to the company’s revenue.
• It does not have its own production facility and must rely entirely on third-party producers.
• Advertising consumes a significant portion of revenue, reducing profit margins.
• Despite remarkable revenue growth, the company has experienced recurring losses.
• operates in a very competitive business with numerous well-established players

Key Financials of the Company

Assessing the core financials of a company can provide you with an idea of its future growth potential. The table below portrays the key financials of Honasa Consumer Ltd. for the last three years. All details are as per the company’s RHP on the SEBI website dated 23 October 2023:

*Amount in Crores

The key points you can conclude from the table are:

• The financials of the company are highly inconsistent
• Revenue has grown robustly between FY21 and FY23
• The profits and net worth have remained erratic
• The ROE for FY23 is in the negative
• 

Details of the IPO

Honasa Consumer IPO goes on sale to the public on Tuesday, October 31st, and ends on Thursday, November 2nd, 2023. The IPO consists of a public offering for Rs. 1,336.44 crores and a fresh issue worth Rs. 365 crores. The price range has been set at Rs. 308-324 per share.

The objectives of the IPO include:

• Fund advertisement expenses
• Set up new brand outlets
• Invest in the recently acquired subsidiary BBLUNT

The following table contains more information on the IPO:

Also read :- Upcoming IPOs in November 2023

To conclude

Honasa Consumer Ltd.’s financials have been all over the place, so you should be wary of investing in their IPO. To make a smart investment, you need also examine the company’s strengths, weaknesses, dangers, and industry dynamics.

The post Honasa Consumer IPO: A Look At the Buzzworthy Offering appeared first on Republic Aeon.

Here are the top ten things you should know before signing up for the offer:

1) IPO Dates

The IPO will open for subscription on November 3 and finish on November 7.

2) Price Band

The range of Rs 57-60 per share has been determined as the issue price.

3) Offer Details

ESAF Small Finance Bank public offer consists of a new issue of 6.51 crore shares worth Rs 390.7 crore and a sale of 1.2 crore shares for Rs 72.3 crore. In the OFS, promoter ESAF Financial Holding would sell shares worth Rs 49.26 crore, while investors PNB Metlife India Insurance Company will sell Rs 12.67 crore in shares and Bajaj Allianz Life Insurance Company will sell Rs 10.37 crore in shares. The issue includes a reservation of Rs 12.5 crore in shares for its employees, who would get them at a discount of Rs 5 per share from the final issue price.

4) Objectives of Issue

The net proceeds from the fresh issuance will be put toward developing the bank’s operations, principally through onward lending, and bolstering the bank’s Tier-I capital base to meet future capital requirements.

5) Lot Size

Each investor can place a bid for a minimum of 250 equity shares and in increments of 250 thereafter. Therefore, the lowest possible investment for an individual investor would be Rs 14,250 (250 (Lot size) x 57 (lower price band)). Maximum bids can reach Rs 15,000 in this auction.

6) Company Profile

Customers in rural and semi-urban areas can get loans from ESAF Small Finance Bank. Microloans, retail loans, loans to small and medium-sized businesses, and loans to other banks are all available through this organization. Across 21 states and 2 territories, the bank operates a network of 700 branches (including 59 branches run by business correspondents), 767 customer care centers, and 559 automated teller machines.

7) Financials

The net profit for ESAF Small Finance Bank for the fiscal year that ended in March 2023 increased by 452 percent, reaching Rs 302.33 crore from Rs 54.73 crore the previous year. With deposits up 14.4 percent to Rs 14,665.6 crore and disbursements up 23 percent to Rs 14,690.6 crore, net interest income for the year climbed by 60 percent on-year to Rs 1,836.3 crore. Gross non-performing assets decreased by 451 basis points year over year to 1.65 percent by the end of the June FY24 quarter, while net NPA decreased by 297 basis points year over year to 0.81 percent.

8) Lead Managers

ICICI Securities, Dam Capital Advisors, and Nuvama Wealth Management are acting as book-running lead managers for the issuance, with Link Intime India serving as the registrar.

9) Promoters

ESAF Financial Holdings Private Limited and Kadambelil Paul Thomas are our bank’s promoters.

10) Listing Date

According to the IPO timetable, trading of equity shares in ESAF Small Finance Bank will begin on the bourses on November 16.

Also read :- Dabur India spent Rs 65 cr in legal costs as hair relaxer cancer case continues in US

The post ESAF Small Finance Bank IPO: 10 things to know before subscribing to Rs 463 crore issue appeared first on Republic Aeon.

The company has stated that the anchor book of the offer would be opened for a day on November 6. Following ESAF Small Finance Bank and Protean eGov Technologies, this will be the third such IPO in November. ASK Automotive promoters Kuldip Singh Rathee and Vijay Rathee have issued an offer-for-sale (OFS) of 2,95,71,390 equity shares.

According to the news agency, because the IPO is an OFS, the whole proceeds will go to the selling shareholders, and the firm will not get any funds from the issuance. The IPO is projected to raise Rs 833.91 crore at the top of the pricing band. Half of the offer has been reserved for qualified institutional investors, 35% for retail investors, and the remaining 10% for institutional investors. Investors can bid for a minimum of 53 equity shares and in multiples of 53 equity shares after that.

The shares are expected to be listed on the BSE and NSE. The IPO of ESAF Small Finance Bank will be available for public subscription on November 3, while Protean eGov Technologies will go public on November 6. 

Gurugram-based ASK Automotive is one of India’s major manufacturers of brake-shoe and sophisticated braking systems for two-wheelers, with a market share of over 50% in fiscal 2022. The company provides safety systems and key engineering solutions with in-house design, development, and production skills. Its offerings are powertrain agnostic, catering to both electric vehicle (EV) and internal combustion engine (ICE) original equipment manufacturers.   

TVS Motor Company Ltd, Hero MotoCorp, Greaves Electric Mobility, and Bajaj Auto are among its clientele.  The book-running lead managers are JM Financial Ltd, Axis Capital Ltd, ICICI Securities Ltd, and IIFL Securities Ltd.

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The post ASK Automotive IPO price band at Rs 268-282 per share, to raise Rs 834 crore appeared first on Republic Aeon.

According to the announcement, Mamaearth plans to sell 41,248,162 shares of stock in order to raise 365 crore in primary capital.Fireside Ventures, Stellaris Venture Partners, Sofina Ventures, and the wealthy individuals Kunal Bahl, Rishab Mariwala, Rohit Bansal, and Shilpa Shetty are all selling a portion of their stake in the company in the IPO.

On Tuesday, October 31, subscribers can begin purchasing shares in Mamaearth, and they will have until Thursday, November 2, to do so. Honasa Consumer’s IPO allocation to anchor investors is set for Monday, October 30.Mamaearth has set its initial public offering (IPO) pricing range between $30.80 and $32.40-per-share, with a floor price of $30.80 and a ceiling price of $32.40-per-share. Each IPO lot of Mamaearth equity is comprised of 46 shares, with further lots available in 46-share increments.

Qualified Institutional Buyers (QIBs) will get not less than 75% of the shares in the public issue from the Mamaearth IPO, Non Institutional Investors (NIIs) would receive not more than 15%, and Retail Investors will receive no more than 10%. When employees participate in the employee reserve section of the auction, they can receive a discount of 30 per equity share.

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Mamaearth IPO details

Mamaearth is raising up to 365 crore through an initial public offering (IPO), with the OFS consisting of around 4.12 crore shares. Honasa promoter Varun Alagh plans to sell 3,186,300 shares in the IPO, while his wife Ghazal Alagh may sell up to 100,000 shares. Other investors selling their shares in the OFS include Kunal Bahl, Shilpa Shetty Kundra, Rishabh Harsh Mariwala, Fireside Ventures Fund, Sofina, Stellaris, and Rohit Kumar Bansal.

Advertising expenses to increase brand visibility and recognition; New EBO development funding; General corporate purposes The business plans to use the net proceeds to finance these general corporate purposes. The investment funds will be used for Bhabani Blunt Hairdressing Private Limited’s (BBlunt) expansion into new salon locations, as well as for other business purposes and an undisclosed inorganic purchase.

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Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, Jm Financial Limited, and J.P. Morgan India Private Limited are the book running lead managers for the Honasa Consumer initial public offering. Kfin Technologies Limited is the offering’s registrar.

Allocation for the Honasa Consumer IPO is expected to close on November 7. The BSE and NSE are expected to host the initial public offering (IPO) for Honasa Consumer on November 10.

Also read :- Government Loan Schemes for Startups, Businesses & MSMEs – 2023

The post Mamaearth sets price band of Rs 308-324 a share for October 31 IPO appeared first on Republic Aeon.

 The fast-growing D2C (direct-to-consumer) firm, which operates in the beauty, babycare, and skincare areas, was the first unicorn of 2022, receiving regulatory approval for the listing from Sebi in August after filing draft papers in December 2022.

“The Honasa Consumer IPO, which is scheduled for October 31 to November 2, is in high demand.” The anchor segment will debut on October 30. As of now, there are no plans for a pre-IPO round, according to one of the sources.

Varun and Ghazal Alagh (of ‘Shark Tank’ fame) co-founded Honasa Consumer in 2016. The company achieved unicorn status after receiving $52 million at a valuation of $1.2 billion in a fundraising round spearheaded by prominent VC firm Sequoia Capital in January 2022.

According to another source, the company is trying to raise roughly Rs 1,700 crore through a combination of a fresh issuance and an offer-for-sale, with an estimated worth of around Rs 10,500 crore.

A third source corroborated the intended timetable for the transaction, as well as the valuation and size of the issuance.

Moneypoise spoke with three people who all declined to go on the record. Moneypoise was unable to obtain fast feedback from Honasa Consumer and will update this post as soon as the firm responds.

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The valuation controversy

In June 2022, a Reuters article claiming Honasa Consumer was aiming for a $3 billion (in excess of Rs 22,000 crore) valuation for its IPO sparked outrage on social media, with analysts and industry experts criticizing the excessive figure.

As a result, Ghazal Alagh issued a lengthy clarification. “There is no mention of valuation in our DRHP, as is standard practice.” Valuation discovery is a process that will unfold over time as we engage in deeper discussions with the investing community. We have neither cited or subscribed to the valuation figures mentioned in various social media posts. “We built this company and our brands with a lot of love, just like we raised our children,” she wrote on Twitter.

The investment banks working on the IPO include Kotak Mahindra Capital, JM Financial, Citi, and JP Morgan, while the legal advisors are Cyril Amarchand Mangaldas, IndusLaw, and Khaitan & Co.

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The Alaghs, Sofina Ventures SA, Evolvence, Fireside Ventures, Stellaris Venture Partners, Snapdeal founder Kunal Bahl, Bollywood actress Shilpa Shetty Kundra, Rishabh Harsh Mariwala, and Rohit Kumar Bansal are among the shareholders who will dilute their holdings, according to the DRHP (draft red herring prospectus). Sequoia Capital is not taking part in the OFS.

The net proceeds of the IPO will be used for advertising to increase brand visibility and awareness, opening new exclusive brand outlets, investing in BBlunt to open more salons, general business objectives, and inorganic expansion.

A competitor in the thriving D2C industry – Warburg Pincus funded boat – also filed for an IPO in January 2022. The audio-focused electronics company hopes to raise approximately Rs 2,000 crore.

The Honasa blueprint

Honasa Consumer, known for its extensive selection of ‘toxin-free’ products, has made three acquisitions in the recent 24-36 months. It began by acquiring the female-oriented content platform Momspresso, then BBlunt from Godrej Consumer Products Ltd, and later expanded its product portfolio by acquiring the skincare brand Dr Sheth’s. In October 2021, it entered the color cosmetics market, selling liquid lipsticks, bullet lipsticks, kajal, and lip balms. A month later, the company created Aqualogica, a hydration-focused skincare brand.

Other players in the beauty and skin care space include noted competitor Nykaa, Purplle, The Good Glam Group, and Sugar Cosmetics.

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Moneypoise stated on November 3, 2022 that Honansa became profitable in FY 22, generating a net profit of close to Rs 20 crore. In addition, revenue increased by 102 percent in the fiscal year to Rs 952 crore from the previous year. According to the report, the company spent Rs 391 crore on advertising in FY22, while its cost of materials and employee benefit spending grew to Rs 281 crore and roughly Rs 79 crore, respectively.

Honasa began retailing through D2C, then online marketplaces, and is now trying to expand its offline presence. It is also collaborating with local channels for Mamaearth’s international expansion into markets such as Bangladesh, Malaysia, Vietnam, and Thailand.

Varun Alagh stated on Business Today TV on September 10, 2022, “Our gross profitability metrics are very healthy.” And, if we compare it to the public FMCG counterparts, we’ll most likely be in the top 5% of the group in terms of gross profitability profile.”

“We’re now in nearly 40,000 stores in over 100 cities.” “In terms of availability, we continue to double down,” he continued.

The Indian BPC market

According to the DRHP, Honasa Consumer is the largest digital-first BPC (beauty and personal care) company in India in terms of revenue from operations for the Fiscal Year 2022 (Source: RedSeer Report). We have a portfolio of six BPC brands with distinct value propositions, and as of September 30, 2022, our flagship brand, Mamaearth, had emerged as the fastest-growing BPC brand in India, with an annual revenue of Rs 10 billion (in the previous 12 months) within six years of launch (Source: RedSeer Report).

The DRHP goes on to say that the market for BPC products in India is expected to grow from about $17 billion in 2021 to about $30 billion in 2026 at a CAGR of about 12%, which is among the highest among the broader retail categories and faster than other retail categories in India during this period.

“The BPC products market lends itself well to digital penetration and the online BPC market, which is currently sized as $2.5 billion, is expected to grow at 27 percent annually to be around $8.4 billion by 2026, translating to an online penetration of 28 percent,” the research firm claims.

The post Mamaearth parent plans Rs 1,700-cr IPO on Oct 31; Honasa aims at Rs 10,500-cr valuation appeared first on Republic Aeon.