NEW DELHI: Amid skepticism and an ‘Avoid’ rating from a section of analysts, the initial public offering (IPO) of Honasa Consumer, the parent firm of Mamaearth, was subscribed just 12% on Tuesday, the first day of bidding.
Investors bought 36.07 lakh equity shares against an offer size of 2.89 crore shares, according to the BSE data. Owing to the high valuation of over Rs 10,000 crore, the beauty and personal care firm is seeking, subscription of the IPO is being keenly followed by the market. In the unofficial grey market, the company’s shares are commanding a marginal premium of Rs 7.
Shivani Nyati, head of wealth at Swastika Investmart Ltd, said on Tuesday that the financial performance of the company has been inconsistent, and it has reported losses in recent fiscals. Subsidiaries that it has acquired have also incurred losses.
“As it is a loss-making company, we can’t derive its actual P/E, but even after considering its outflow in the latest investment, the company is coming at an extremely high valuation. Thus, I will suggest to Avoid this IPO,” Nyati added.
In FY23, Honasa reported a net loss of Rs 150.97 crore as against a net profit of Rs 14.44 crore in FY22. Operating revenue rose 58% year-on-year to Rs 1,492.75 crore. Nyati raised concerns about the business’ return on advertising, which has been consistent for a few years, i.e., 2.5%, thus the its client retention is very low.
The quota of retail investors was subscribed 34% and the high-networth individuals (non-institutional investors) purchased just 3% shares of the reserved portion. The portion reserved for qualified institutional buyers was subscribed 10%. Honasa has reserved 75% of the net issue size for qualified institutional buyers, 15% for high networth individuals and the remaining 10% for retail investors.