Honasa Consumer Limited (Mamaearth) IPO

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i. Mamaearth is the largest digital-first beauty and personal care (“BPC”) company in India in terms of revenue from operations for the Financial Year 2022. Since its inception, they have worked with the primary objective of developing products that address beauty and personal care problems faced by consumers. For instance, their flagship brand, Mamaearth, is built to service a core customer need for safe-to-use, natural products, and focuses on developing toxin-free beauty products made with natural ingredients. Mamaearth has emerged as the fastest-growing BPC brand in India to reach an annual revenue of ₹10 billion (in the preceding 12 months) within six years of launch.

ii. Since launching Mamaearth in 2016, the company has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s, and have built a ‘House of Brands’ architecture. As of September 30, 2022, the portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments.

iii. The graphic below provides a brief overview of the brands:

iv. Additionally, the company continuously seek to connect better with its consumers and strengthen its brand equity by building ‘purposedriven’ brands that are associated with environmental and social impact causes. For instance, through the Mamaearth ‘Plant Goodness’ initiative, they work with a non-government organisation to plant trees for orders placed on its direct-to-consumer (“DTC”) platform and share geo-tagged images of these trees with the consumers. Similarly, The Derma Co. is associated with a ‘Young Scientists’ program wherein children in certain rural parts of India are provided with access to education in science, and Aqualogica is associated with a ‘Fresh Water for All’ initiative wherein they help enable access to clean drinking water for marginalized communities.

v. They make their products available to their customers through omni-channel distribution networks across both online and offline touchpoints. They strategically leverage its presence on online channels (both DTC platforms and e-commerce marketplaces) during the early stages of a brand or products lifecycle to generate trials amongst early adopters, engage with consumers directly and test for product market fit. Once a product or brand reaches a mature stage, they selectively introduce such products and brands in offline stores to drive penetration amongst a larger consumer base.

vi. Their sharp focus on the BPC category coupled with the strengths in brand building, innovation, distribution, and marketing have positioned us well and enabled us to establish a strong presence in the Indian BPC market.

vii. Competitive Strengths
Brand building capabilities and repeatable playbooks
Consumer-centric product innovation
Digital-first omnichannel distribution
Data-driven contextualized marketing

Objects of the Honasa Consumer Limited (Mamaearth) IPO:

The Offer comprises the Fresh Issue and an Offer for Sale. The company propose to utilise the Net Proceeds towards funding the following objects: 1. Advertisement expenses towards enhancing the awareness and visibility of the brands; 2. Capital expenditure to be incurred by the Company for setting up new EBOs; 3. Investment in the Subsidiary, Bhabani Blunt Hairdressing Private Limited (“BBlunt”) for setting up new salons; 4. General corporate purposes and unidentified inorganic acquisition The Total number of shares are issues: - 1. Fresh Issue is 11,850,649 shares. 2. Offer for Sale is 41,248,162 shares.

Honasa Consumer Limited (Mamaearth) IPO Details:

Open Date: Oct 31 2023
Close Date: Nov 02 2023
Total Shares: 53,098,811
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue
Issue Size: 1,701 Cr.
Lot Size: 46 Shares
Issue Price: ₹ 308 to ₹324 Per Equity Share
Listing At: NSE,BSE
Listing Date: Nov 10 2023

Promoters And Management:

i. Varun Alagh is one of the Promoters of the Company. He is the Chairman, Whole-time Director and the Chief Executive Officer of the Company. He holds a bachelor’s degree of engineering (electrical) from the University of Delhi, Delhi and a post-graduate diploma in business management from XLRI, Jamshedpur. He has been associated with the Company as a promoter and a director since September 16, 2016. Previously, he has worked with corporations such as Hindustan Lever Limited, Diageo India Private Limited for over a year and Coca-Cola India Private Limited. ii. Ghazal Alagh is one of the Promoters of the Company. She is a Whole-time Director and the Chief Innovation Officer of the Company. She holds a bachelor’s degree of computer applications from Panjab University, Chandigarh and a certification in software engineering from the academic council of the NIIT Academy, New Delhi. She has been associated with the Company as a promoter and director since September 16, 2016. iii. Ishaan Mittal is a Non-Executive Director of the Company and a nominee of SCI on the Board. He holds a bachelor’s degree of technology in mechanical engineering from the Indian Institute of Technology, Delhi and a master’s degree in business administration from Harvard University, Commonwealth of Massachusetts. He has been associated with the Company as a director since January 3, 2020. Previously, he has worked with the Boston Consulting Group (India) Private Limited for a period of over a year and is working with Sequoia Capital India for a period of over eight years where he is currently working as “Managing Director”.

Financials of Honasa Consumer Limited (Mamaearth) IPO:

A. Balance Sheet
Particular (In Million) Mar-21 Mar-22 Mar-23
Equity Share Capital 0.13 0.13 1,363.36
Reserves -17,652 7,056 4,696
Borrowings 19,540 36 36
Trade Payables 803 1,704 1,967
Other Liabilities 334 1,555 1,602
Total Liabilities 20,678 3,294 3,605
Net Block 11 44 134
Other Assets 262 4,286 3,226
Total NC Assets 273 4,330 3,360
Receivables 338 728 1,277
Inventory 413 659 1,139
Cash & Bank 208 877 681
Other Assets 1,794 3,757 3,208
Face value 10 10 10
B. Profit & Loss Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Sales 4,600 9,435 14,927
Raw Material Cost 1,608 3,048 5,024
Change in Inventory -281 -213 -557
Employee Cost 278 788 1,649
Other Expenses 16,336 5,697 8,584
Other Income 121 209 225
Depreciation 17 69 250
EBITDA -13,219 323 453
EBITDA Margin -287.38% 3.43% 3.03%
Interest 10 30 67
Profit before tax -13,246 224 -1,410
Tax 76 80 99
Net profit -13,322 144 -1,510
NPM (%) -282.19% 1.50% -9.96%
C. Cash Flow Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Cash From Operating Activity
Profit From Operation 324 327 657
Receivable -235 -331 -593
Inventory -281 -213 -550
Payable 584 874 246
Other WC Items -32 -117 -152
Working Capital Changes 37 213 -1,048
Direct Taxes -63 -95 -125
Net Cash Inflow from Operating Activity 297 446 -516
Cash from Investing Activity
Fixed assets purchased -10 -14 -117
Investments purchased -750 -6,104 -1,546
Investment sold 448 4,497 2,425
Investment in subsidiaries 0 -1,633 -139
Acquisition of companies 0 -563 0
Other investing items 106 -1,180 -194
Net cash inflow from investing activities -206 -4,998 429
Cash from Financing Activity
Proceeds from shares 1 1 49
Repayment of borrowings 0 0 -25
Intrest paid fin -2 -4 -11
Other financing items -12 4811 -154
Net Cash Flow 78 256 -227

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Honasa Consumer Limited 1493 -151 -4.68 -69.2 324 10,443
Hindustan Unilever Limited 60580 10,143 43.07 56.3 2476 5,81,501
Colgate Palmolive (India) Limited 5,226 1,047 38.5 46.6 2,034 55,362
Dabur India Limited 11,530 1,701 9.64 52.8 511 90,613
Marico Limited 9,764 1,322 10.07 51.3 538 69,628
Godrej Consumer Products Limited 13,316 1,702 16.65 55.6 964 98,553
Emami Limited 3,406 627 14.5 31.9 501 22,058
Bajaj Consumer Care Limited 961 139 9.63 22.8 240 3,458
* Note: - There are no listed companies in India and globally that are of comparable size from the same industry as this Company. However, there are listed companies in India that are of larger size with longer operating histories and varied business models and offerings, that operate in the fast moving consumer goods space, including the BPC segment.

Recommendation on Honasa Consumer Limited (Mamaearth) IPO:

Analysis of Mama Earth's IPO

Mama Earth has recently launched its IPO. Despite generating a revenue of approximately INR 1,500 crore in FY23, the company reported a loss of INR 150 crore. On close inspection of the profit & loss statement, it becomes evident that the company has spent around INR 500 crore solely on advertising and another INR 144 crore on sales commission. This accounts for nearly 42% of their total expenses. When compared to industry giants like HUL, the advertising expenditure for Mama Earth seems disproportionately high. This impacts the company's profit margins adversely. Furthermore, upon reviewing Mama Earth's balance sheet, it appears that their Property, Plant, and Equipment (PPE) is valued at just INR 13 crore. This suggests that the company does not have its own manufacturing unit and relies on third-party manufacturers for their products. This is another factor contributing to their lower profit margins, especially when compared to other listed FMCG players. In terms of sales channels, approximately 54% of Mama Earth's products are sold through Amazon and Flipkart, while the rest are sold through their own website. This also means that a significant portion of their revenue goes towards commission fees to these platforms. The company's heavy reliance on third-party manufacturing and online marketplaces like Amazon and Flipkart indicates a high level of dependency on external factors. Additionally, the promoters of the company, Varun Alag and Ghazal Alag, are selling approximately 33 lakh shares through the IPO, which will generate around INR 103 crore for them. This sale by the promoters could be seen as a red flag. Finally, the company's valuation stands at around INR 10,000 crore, which seems excessively high given the aforementioned factors.


Overall, the business does not offer much to entice investors, given its high valuation, significant losses despite substantial revenue, and dependency on third parties for manufacturing and sales.

Registrar of Honasa Consumer Limited (Mamaearth) IPO:

  1. Kfin Technology Private Limited

Company Address:

Plot No. 63, 4th Floor, BLM Tower, Netaji Subhash Marg, Sector-44, Gurugram 122 003, Haryana, India

Discussion on Honasa Consumer Limited (Mamaearth) IPO:

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