Mamaearth IPO: D2C Brand Raises INR 765 Cr From Anchor Investors

Honasa Consumer Limited (HCL), the parent company of the D2C unicorn Mamaearth, has allocated 2.36 Cr equity shares to anchor investors, raising INR 765.2 Cr as part of its initial public offering (IPO).

Honasa, whose IPO is opening tomorrow (October 31), said in a regulatory filing on Monday (October 30), “…in consultation with Kotak Mahindra Capital Company Limited, Citigroup Global Markets India Private Limited, JM Financial Limited and J.P. Morgan India Private Limited (“Book Running Lead Managers”), have finalised allocation of 23,617,228 equity shares to anchor investors at anchor investor allocation price of INR 324 per equity share (including share premium of INR 314 per equity share).”

The company allocated the equity shares to 49 anchor investors, including Fidelity Funds, ICICI Prudential FMCG Fund, Whiteoak Capital, DSP India Fund, and several others.

Seven domestic mutual funds, including Aditya Birla Sun Life and Axis Mutual Fund, applied through a total of 19 schemes for the anchor portion.

Mamaearth filed its draft red herring prospectus (DRHP) in December last year. It filed its RHP on October 23, 2023.

The company’s IPO includes a fresh issue of equity shares aggregating up to INR 365 Cr or $44 Mn. It also includes an offer for sale (OFS) component of 4.12 Cr shares, which would see key shareholders including Kunal Bahl, Shilpa Shetty Kundra, and Rishabh Harsh Mariwala offloading their stakes.

The IPO will close on November 2. 

Mamaearth has set the IPO price band at INR 308-INR 324. It is targeting a valuation of about $1.2 Bn through the IPO.

Founded in 2016 by the husband-wife duo of Varun and Ghazal Alagh, Mamaearth’s parent Honasa’s brands also include The Derma Co., Aqualogica, and Ayuga, and acquired stakes in BBlunt and Dr. Sheths.

However, even after the major bloodbath that the loss-making publicly listed startups faced last year, Mamaearth is taking the IPO route while being in the red. The company reported a net loss of INR 151 Cr in FY23 as against a net profit of INR 14.4 Cr in FY22 due to an exceptional loss.

Speaking on the IPO, Prashanth Tapse, senior VP of research at Mehta Equities said that new investors should be cautious as the IPO includes fresh share issuance of INR 365 Cr and a low 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.

On the other hand, Girish Vanvari, founder and CEO of tax, regulatory and business advisory firm Transaction Square, told Inc42 that Mamaearth IPO is a “test case” and would be a significant and defining trend for all unicorn IPOs, which has taken a backseat.