Mamaearth parent files IPO papers; Sofina, Stellaris, Kunal Bahl, Shilpa Shetty to sell stake

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

Honasa Consumer Private Ltd, the first unicorn of 2022 and the parent firm of brands such as Mamaearth, The Derma Co and BBlunt has filed draft papers with Sebi for listing to raise funds through a combination of a  fresh issue and an offer-for-sale.

The fast-growing D2C (direct to consumer) firm, present in the beauty, babycare and skincare segment, was co-founded in 2016 by the husband-wife duo of Varun and Ghazal Alagh (of ‘Shark Tank’ fame.) It attained the unicorn status when it raised $52 million at a valuation of $1.2 billion in a fundraising round in January led by top VC firm Sequoia Capital.

The fresh issue size is up to Rs 400 crore and the OFS component by a clutch of external investors and individual shareholders is up to 46,819,635 equity shares, according to the draft red herring prospectus reviewed by Moneycontrol.

The shareholders who will dilute their holdings include the Alaghs,  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. Sequoia Capital is not participating in the OFS.

“The combined size of the IPO could range between Rs 2,400 crore and Rs 3,000 crore, though the exact quantum at the time of listing would depend on final valuations,” said one of the persons cited above.

“The plan is to launch the deal in March next year but that timeline is subject to market conditions,” a second person told Moneycontrol.

A third person elaborated that a combination of strong brand and product management and the right hybrid model had helped Honasa Consumer to scale up its business.

All three spoke to Moneycontrol on the condition of anonymity. An email query has been sent without any response from Honasa Consumer till time of filing this story. This article will be updated once we hear from the firm.

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

Mamaearth’s filing with the market regulator comes on the back of another filing back in January by a peer in the bustling D2C space – Warburg Pincus backed boat. The audio focused electronics brand is looking to raise around Rs 2,000 crore.

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.

The Tale of Honasa Consumer

Honasa Consumer , which is popular for its wide range of ‘toxin free’ products has hit the inorganic route in the last 12-15 months with three buyouts. Firstly, it acquired female oriented content platform Momspresso followed by BBlunt from Godrej Consumer Products Ltd and later it beefed up its product portfolio by acquiring skincare brand Dr. Sheth’s. It  entered the colour cosmetics category in October, 2021, offering products like liquid lipsticks, bullet lipsticks, kajal and lip balms. A month later, the firm launched a new hydration based skincare brand Aqualogica.

Other players in the beauty and skin care segment include the likes of listed rival Nykaa, Purplle, The Good Glam Group & Sugar Cosmetics. Nykaa had a bumper debut on the bourses in 2021 but the firm’s share price has plummeted since then.

On November 3, Moneycontrol had reported that Honansa turned profitable in FY 22, posting a net profit of close to Rs 20 crore. The firm also saw its revenue surge by 102 percent to Rs 952 crore in the fiscal compared to the year-ago period. In FY22, the company spent Rs 391 crore on advertising, while its cost of materials and employee benefit expenses increased to Rs 281 crore and nearly Rs 79 crore, respectively, the report added.

The potential of the Indian BPC market

This is how Honasa Consumer positions itself in the DRHP: “We are the largest digital-first BPC ( beauty and personal care) company in India in terms of revenue from operations for the Financial Year 2022 (Source: RedSeer Report). We have a portfolio of six BPC brands with differentiated value propositions and as of September 30, 2022, our flagship brand, Mamaearth, has emerged as the fastest growing BPC brand in India to reach an annual revenue of Rs 10 billion (in the preceding 12 months) within six years of launch (Source: RedSeer Report). ”

The DRHP goes on to add that the market for BPC products in India is expected to grow from approximately $17 billion in 2021 to approximately $30 billion in 2026 at a CAGR of approximately 12 percent, which is among the highest within the broader retail categories and faster than other retail categories in India during this period.

“The BPC products market lends itself well to digital penetration and the online BPC market, which is currently sized as $2.5 billion, is expected to grow at 27 percent annually to be around $8.4 billion by 2026, translating to an online penetration of 28 percent,” the DRHP says.

Honasa kickstarted retailing through the D2C route, followed by online marketplaces and is now looking to scale up its offline presence.

In an interview dated September 10 with Business Today TV, Varun Alagh said: “Our gross profitability metrics are very healthy. And, if we were to compare it to the listed FMCG peers, we’ll probably be in the top five per cent quartile of the set from a gross profitability profile perspective.”

“We are there in almost 40,000 stores, across 100 plus cities now. From an availability perspective, we continue to double down on it,” he added.

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