Mamaearth set to boost growth with IPO funds: expansion plans include boosting brand visibility, opening new stores, and investing in BBlunt salons.

Honasa Consumer to Raise Funds via Sebi Listing

Honasa Consumer, the parent company of well-known brands Mamaearth, The Derma Co and BBlunt, is taking the plunge into the world of public markets with its draft papers filed to raise funds via Sebi listing.

The rapidly growing D2C unicorn, co-founded by the dynamic husband-wife team of Varun and Ghazal Alagh, achieved the coveted $1.2 billion valuation after raising $52 million in a funding round led by top venture capital firm Sequoia Capital in January 2022.

The funds raised will be used to seize opportunities in the booming beauty, babycare, and skincare industries.

 

IPO Details

According to the draft red herring prospectus, the Honasa Consumer, parent company of brands such as Mamaearth, The Derma Co and BBlunt, plans to raise funds through a combination of a fresh issue of up to INR 400 crore (approximately $53.7 million) and an offer-for-sale of up to 46,819,635 equity shares.

The offer-for-sale will include shares from a number of external investors and individual shareholders, including the company’s co-founders, Varun and Ghazal Alagh, 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.

It’s worth noting that Sequoia Capital, which led the previous funding round in January, will not participate in the offer-for-sale.

The Honasa Consumer is preparing to launch its Initial Public Offering (IPO) with a combined size that could range between INR 2,400 crore and INR 3,000 crore (approximately $321.2 million – $401.5 million), according to sources familiar with the matter.

The exact amount will depend on final valuations at the time of listing. The plan is to launch the deal in March , but this timeline is subject to market conditions.

Strong Brand and Product Management

It’s worth noting that strong brand and product management, along with the right hybrid business model, have been instrumental in Honasa Consumer’s ability to scale its business.

The company has a strong reputation in the beauty, babycare, and skincare segments, and has achieved a $1.2 billion valuation after raising $52 million in a funding round led by top venture capital firm Sequoia Capital in January 2022.

With the funds raised through the IPO, the company plans to capitalize on the growth opportunities in these segments.

Use of Funds

The net proceeds of the IPO will be used to improve brand visibility and awareness, set up new exclusive brand outlets, invest in BBlunt for setting up new salons, general corporate purposes, and inorganic growth.

Honasa Consumer Achieves Profitability in 2022

Honasa Consumer, the parent company of popular brands Mamaearth, The Derma Co, and BBlunt, has achieved profitability in the fiscal year of 2022.

According to recent financial reports, the company posted a net profit of close to INR 20 crore (approximately $2.67 million) and saw its revenue surge by 102% to INR 952 crore (approximately $128 million) compared to the year-ago period.

Positive Impacts

• The company’s revenue growth of 102% is a strong indicator of its financial health and growth potential.
• The net profit of INR 20 crore (approximately $2.67 million) demonstrates the company’s ability to generate positive earnings and be profitable.
• The company’s heavy investment in advertising, with INR 391 crore (approximately $52.6 million) spent in the fiscal year of 2022, shows its commitment to improving brand visibility and awareness, which can lead to further revenue growth in the future.

Negative Impacts

• The company’s cost of materials and employee benefits expenses also increased to INR 281 crore (approximately $37.9 million) and INR 79 crore (approximately $10.6 million) respectively, which may impact profitability in the future.
• The company’s heavy investment in advertising may also lead to increased competition and pressure to maintain growth in the future.

 

Advisors

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

Conclusion

Overall, Honasa Consumer’s achievement of profitability in the fiscal year of 2022 is a positive sign for the company’s financial health and growth potential.

However, investors should also consider the company’s increased expenses and potential pressure to maintain growth in the future. It’s important to conduct thorough research and due diligence before making any investment decisions.