“They are fund managers for a reason”: Netizens welcome MFs’ decision to invest in Mamaearth IPO as share prices rise

Shares of Honasa Consumer Ltd, Mamaearth’s parent company, extended strong gains for the second consecutive day in Friday trading. The stock rose 15 percent to hit an all-time high of Rs 487. At this price, the share value has increased by 35 percent in just two days and by a whopping 41 percent since its subdued stock market debut.

Shares of Honasa Consumer rose 20% on Thursday, a day after the company reported a quarterly profit increase.

Honasa’s profit for the quarter ended September 30 almost doubled year-on-year to Rs 29 crore, driven by strong volume growth and higher margins.

Core profit margins rose to 8.1% from 6.4% a year ago, while sales volumes rose 21%.

“Honasa Consumer has been a notable outlier among digital-first beauty and personal care brands in India. We expect industry-leading revenue growth with improving profitability,” analysts at Jefferies said in a note, maintaining their “buy” rating.

Earlier this month, Honasa’s Rs 1,700-crore IPO was subscribed 7.6 times, with institutional investors subscribing 11.5 times and retained investors subscribing just 1.35 times.

The company raised Rs 765 crore from anchor investors and apart from major FPIs, domestic mutual funds also invested in the anchor book.

Seven prominent mutual funds received 33.1% of the anchor allocation, including ICICI Prudential, Aditya Birla Sun Life, Nippon, Axis, Canara Robeco, Invesco and White Oak mutual fund. The mutual funds faced backlash on social media for investing in an IPO that was a mere offer for sale to most existing investors and whose asking valuation is huge at Rs 10,000 crore. Many had said that mutual funds could not justify investing in such overvalued IPOs and that they would rather stop their SIPs in such mutual funds.

However, the fund managers will see this confirmed by the recent price increase.

“Never forget that there is a reason why they are the fund manager and you are not,” quipped one X Platform (formerly Twitter) user.

“For all these experts telling mutual fund managers why they did this: This is retail money, how can they do that? Think long term, they know better than you,” said another X user.

“MF has an outstanding track record of over 30 years in India, trusted/invested and rewarded by millions of investors,” said another X user.