The well-known direct-to-consumer (D2C) beauty and personal care brand Mamaearth’s parent company, Honasa Consumer Limited (HCL), is preparing for a big turning point in its history. The company has declared October 31, 2023, as the date of its first public offering (IPO). This development, which represents the amazing growth and metamorphosis of a once-fledgling firm, has attracted a lot of interest in the Indian market.
The Path to IPO
HCL took a substantial step towards its IPO by submitting a Draft Red Herring Prospectus (DRHP) to the Securities and Exchange Board of India (SEBI) on December 28, 2022. The DRHP is a crucial document that outlines the company’s financials, operations, and future plans. The fact that HCL is moving forward with its IPO suggests that the regulatory authority has given its nod of approval to the company’s plans.
IPO Details and Valuation
HCL aims to raise approximately INR 1,700 Crores through a combination of a fresh issue of shares and an offer-for-sale. The company has set its sights on achieving an estimated valuation of around INR 10,500 Crores. This reflects a promising valuation that indicates investor confidence in the brand’s growth and potential.
Key Players in the IPO
A group of investment banks, including Citi, JP Morgan, JM Financial, and Kotak Mahindra Capital, are involved in the IPO process. These financial organizations are essential to the IPO’s facilitation and underwriting. Prestigious law firms including Cyril Amarchand Mangaldas, IndusLaw, and Khaitan & Co. are providing legal guidance, making sure the IPO complies with all legal and regulatory criteria.
Allocation of Funds
A significant portion of the proceeds from the fresh issue of shares will be directed towards strengthening marketing efforts. This move aims to enhance brand visibility and awareness among consumers, a vital strategy for companies in the competitive beauty and personal care market.
The company also plans to establish new exclusive brand outlets, which can provide a more immersive and personalized shopping experience to its customers. Furthermore, HCL intends to expand its network of BBlunt salons, a strategic move to diversify its business and reach a broader audience.
Shareholders Reducing Their Holdings
In addition to providing HCL with a means of raising funds, the IPO will provide current shareholders with a means of selling or reducing their stakes. The Alagh family, Sofina Ventures SA, Evolvence, Fireside Ventures, Stellaris Venture Partners, Bollywood actress Shilpa Shetty Kundra, Rishabh Harsh Mariwala, Rohit Kumar Bansal, and Snapdeal founder Kunal Bahl are among the notable shareholders wishing to decrease their interests. Interestingly, one of the company’s biggest backers, Sequoia Capital, is not taking part in the selling offer.
Mamaearth’s Remarkable Turnaround
Mamaearth, one of HCL’s flagship brands, has experienced a remarkable turnaround. In FY22, it achieved a net profit of INR 19.8 Crores, a stark improvement from the net loss of INR 1,332.2 Crores in FY21. This transformation can be attributed to increased customer repeat rates and the expansion of sales channels, both online and offline. Mamaearth is on the verge of reaching INR 1,000 Crores in revenue, with its total income soaring by 101% to INR 952.4 Crores in FY22 compared to INR 472.1 Crores in the previous fiscal year.
Expanding Reach and International Ventures
HCL has established a strong online distribution network, covering over 18,000 pin codes in India as of September 2022. Their products are available in more than 700 districts, emphasizing the brand’s widespread reach. The company has also tapped into the traditional retail market, with products available in over 100,000 FMCG retail outlets across India.
In the fiercely competitive beauty e-commerce landscape, HCL faces competition from brands like Nykaa, Purplle, SUGAR, Wow Skin Science, and others. Honasa is actively working towards expanding its flagship brand, Mamaearth, into international markets. Key regions like Bangladesh, Malaysia, Vietnam, and Thailand are on the radar for potential collaborations with local channels. The company has already established a presence in various international markets, such as the UAE, Qatar, Nepal, Malaysia, Maldives, and Mauritius, primarily through Amazon.
The Potential Impact
The Honasa Consumer Limited initial public offering (IPO) is expected to be a momentous occasion in the Indian startup and e-commerce scene. It not only highlights Mamaearth’s success but also the beauty and personal care sector’s growth potential, particularly in the direct-to-consumer market.
HCL will get the funding it needs from the decision to go public in order to develop its marketing initiatives, portfolio of brands, and global presence. Additionally, it will enable current shareholders to get a return on their capital, which could stimulate the market.