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.

 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.

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