Net proceeds from the IPO will be used for advertising spend to improve brand visibility and awareness, establishment of new exclusive branded outlets, investment in BBlut to establish new salons, general corporate purposes and inorganic growth.
Honasa Consumer Private Ltd, the first unicorn of 2022 and the parent company of brands including Mamaearth, The Derma Co and BBlunt, has submitted draft papers to Sebi for listing to raise funds through a combination of a reissue and an offer to sell.
The fast-growing D2C (direct to consumer) company, which operates in the fields of beauty, baby care and skincare, was co-founded in 2016 by husband and wife team Varun and Ghazal Alagh (of Shark Tank fame) achieved unicorn status when it was in the Raised $52 million in a fundraising round led by top VC firm Sequoia Capital on Jan.
The size of the new issues is up to Rs 400 crore and the OFS component of a group of outside investors and individual shareholders is up to 46,819,635 shares, according to the draft prospectus reviewed by Moneycontrol.
Shareholders set to dilute their stakes 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 does not participate in the OFS.
“The combined size of the IPO could range from Rs 2,400 crore to Rs 3,000 crore, although the exact volume at the time of listing would depend on final valuations,” said one of the people quoted above.
“The plan is to launch the deal in March next year, but that timeline depends on market conditions,” a second person told Moneycontrol.
A third person explained that a combination of strong brand and product management and the right hybrid model helped Honasa Consumer grow its business.
All three spoke to Moneycontrol on condition of anonymity. An email inquiry was sent with no response from Honasa Consumer until this report was filed. This article will be updated as soon as we hear from the company.
Net proceeds from the IPO will be used for advertising spend to improve brand visibility and awareness, establishment of new exclusive branded outlets, investment in BBlut to establish new salons, general corporate purposes and inorganic growth.
Mamaearth’s filing with the market regulator follows another filing in January from a colleague in the busy D2C space – a 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, Indus Law and Khaitan & Co are the legal advisors.
The history of Honasa Consumer
Honasa Consumer, known for its wide range of “toxic-free” products, has gone inorganic with three acquisitions in the past 12 to 15 months. First, the company acquired women-focused content platform Momspresso, followed by BBlunt from Godrej Consumer Products Ltd. It later expanded its product portfolio by acquiring skin care brand Dr. Sheth’s. It entered the color cosmetics category in October 2021, offering products such as liquid lipsticks, bullet lipsticks, kajal and lip balms. A month later, the company launched a new moisture-based skincare brand, Aqualogica.
Other players in the beauty and skincare segment include publicly traded rival Nykaa, Purplle, The Good Glam Group and Sugar Cosmetics. Nykaa had a record debut on the stock exchanges in 2021, but the company’s share price has fallen sharply since then.
On November 3rd Moneycontrol had reported that Honansa became profitable in FY22 posting a net profit of almost Rs 20 crore. The company also saw its revenue increase by 102 per cent to Rs 952 crore in the financial year compared to the same period last year. In FY22, the company spent Rs. 3.91 crore on advertising, while its material costs and social security expenses rose to Rs. 2.81 crore and nearly Rs. 79 crore respectively, the report added.
The potential of the Indian BPC market
How Honasa Consumer positions itself in the DRHP: “We are the largest digital-first BPC (beauty and personal care) company in India as measured by operating income for fiscal year 2022 (Source: RedSeer Report). We have a portfolio of six BPC brands with differentiated value propositions and as of 30th September 2022 our flagship brand Mamaearth has emerged as the fastest growing BPC brand in India with annual sales of Rs 10 billion (past 12 months) six Years after launch (Source: RedSeer Report).”
The DRHP adds that the market for BPC products in India is expected to grow from about US$17 billion in 2021 to about US$30 billion in 2026, at a CAGR of about 12 percent, which is among the highest within the broader retail categories and faster than other retail categories in India over the period.
“The market for BPC products is well suited for digital penetration, and the online BPC market, which is currently $2.5 billion in size, is expected to grow 27 percent annually to around $8.4 billion -dollars to grow by 2026, representing 28 percent online penetration. “, says the DRHP.
Honasa launched retail through the D2C route, followed by online marketplaces, and is now looking to expand its offline presence.
In a September 10 interview with Business Today TV, Varun Alagh said, “Our gross profitability ratios are very healthy. And if we were to compare it to its publicly traded FMCG peers, we would probably be in the top five percent quartile of the group from a gross profitability profile perspective.”
“We are now in almost 40,000 stores in over 100 cities. From an availability perspective, we will continue to double it,” he added.
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