Honasa Consumer Limited (HCL), the holding company of the direct-to-consumer (D2C) unicorn Mamaearth, has designated 2.36 crore equity shares for anchor investors, generating INR 765.2 crore in its initial public offering (IPO).
Honasa, launching its IPO today, mentioned in a regulatory filing on Monday (October 30) that it had concluded the allocation of 23,617,228 equity shares to anchor investors in collaboration with Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, JM Financial Limited, and J.P. Morgan India Private Limited (the “Book Running Lead Managers”). These shares were allocated at an anchor investor allocation price of INR 324 per equity share, inclusive of a share premium of INR 314 per equity share.
The equity shares were distributed to a group of 49 anchor investors, which encompassed notable names such as Fidelity Funds, ICICI Prudential FMCG Fund, Whiteoak Capital, DSP India Fund, and various others.
A total of 19 schemes, including applications from domestic mutual funds such as Aditya Birla Sun Life and Axis Mutual Fund, were submitted for the anchor portion.
Mamaearth submitted its draft red herring prospectus (DRHP) in December last year and filed its RHP on October 23, 2023.
The company’s IPO comprises a fresh issue of equity shares amounting to INR 365 crore or $44 million. Additionally, it involves an offer for sale (OFS) of 4.12 crore shares, in which prominent shareholders like Kunal Bahl, Shilpa Shetty Kundra, and Rishabh Harsh Mariwala will divest their holdings.
The IPO is scheduled to conclude on November 2.
Mamaearth has set the IPO price band at INR 308 to INR 324, with a goal of achieving a valuation of about $1.2 billion.
Read More: Mamaearth IPO to open on October 31, price band announced at INR 308 to INR 324 per share
Established in 2016 by the married couple Varun and Ghazal Alagh, Mamaearth’s parent company, Honasa, encompasses brands like The Derma Co., Aqualogica, and Ayuga. It has also acquired interests in BBlunt and Dr. Sheths.
Nonetheless, despite the significant setbacks experienced by loss-making publicly traded startups last year, Mamaearth is embarking on an IPO journey while still operating at a deficit. In FY23, the company disclosed a net loss of INR 151 crore, in contrast to a net profit of INR 14.4 crore in FY22, primarily attributed to an exceptional loss.
Read More: IPO-bound Mamaearth reports INR 151 Cr loss in FY23 due to goodwill impairment
Regarding the IPO, Prashanth Tapse, Senior VP of Research at Mehta Equities, cautioned prospective investors, emphasizing that they should exercise caution due to the IPO featuring a fresh share issuance of INR 365 crore and a relatively modest promoter stake of 37.41%.
“Conservative investors may wait and watch, while risk-takers can consider long-term investment for potential growth. However, the IPO appears to be overvalued in the current market conditions, and historical listings with high valuations have often faced post-listing challenges,” he added.
Conversely, Girish Vanvari, the founder and CEO of Transaction Square, a firm specializing in tax, regulatory, and business advisory, described the Mamaearth IPO as a “test case.” He believes it will serve as a pivotal and defining trend for all unicorn IPOs, which have somewhat receded from the spotlight.
