Honasa Consumer IPO: Mamaearth parent company’s post-IPO blues

Pre-IPO buzz around Honasa Consumer Ltd, the parent company of Mamaearth, was at an all-time high with wife-husband duo and founders, Ghazal and Varun Alagh, blowing out all the stops, making appearances everywhere from prime-time television to LinkedIn.

The company listed on November 7 and raised around Rs 1,700 crore via IPO.

On November 10, Honasa Consumer Ltd saw its shares decline by nearly 15 percent, reaching a new record low. The stock dropped by 21 percent from its initial issue price of Rs 324 per share, leading to a market capitalisation loss of over Rs 1,300 crore, as reported in Moneycontrol.

The report also stated that the stock had been on a continuous decline since its listing and several analysts had advised avoiding the IPO, citing aggressive pricing.

It noted that analysts said that “Honasa has built consumer trust and brand resonance, exemplified by Mamaearth’s rapid rise in India’s DTC BPC sector in just six years. With a solid gross margin of over 70 percent and an asset-light model, the company has shown remarkable growth in the past five years. However, while achieving profitability, concerns remain about sustaining earnings growth and strengthening the bottom line.”

Earlier on November 10, Anuj Singhal, Managing Editor, CNBC-Awaaz and CNBC-Bajar, shared on X: “Honasa now down to 275 from issue price of 324. Classical case of everything being sucked out by pre IPO investors with absolutely nothing left on the table for IPO investors.”

Honasa Consumer saw its three-day IPO being subscribed 7.6 times led mainly by institutional investors and employees, and it included a fresh equity issue of ₹365 crore and an Offer for Sale of around 4.12 crore shares.

Retail investors chose to exercise caution on the IPO, with their portion being subscribed only 1.35 times.

Ajay Bodke, Market Expert told CNBC-TV18, “I would advise investors to be extremely cautious on Honasa, sheer valuations at which the company has come with IPO, I think makes me extremely worried about any further commitment. Again, out here, although the opportunity size is pretty large, the margin of safety from an entry perspective, I think the company in my opinion, and I might be wrong, has not left much on the table.”

He added, “The pain, that’s some the new age companies went in, when they listed at very high valuations, I think in my opinion, I won’t be too surprised if the investors who have enthusiastically piled on Honasa at the current valuation might have to endure that pain before the stock starts going up. There has to be at least time correction if not price correction in Honasa.”

Update: Shares of Honasa Consumer Ltd., recovered as much as 15 percent from its intraday low to trade with gains during Friday, November 10’s trading session, CNBC-TV18 reported, stating that the recovery came after brokerage firm Jefferies initiated a “conviction” buy on the stock, the first after the stock listed. The brokerage ascribed a price target of ₹520 on the stock, which is a potential upside of nearly 70 percent on the stock from its current levels.

Founder Ghazal Alagh, who also featured as a Shark on Shark Tank India, shared on her LinkedIn after the listing: “Not been an easy ride but we are so proud of what we have achieved. Still a long long way to go. This poem that Varun Alagh wrote gives an essence of how we feel right now as a listed company. It is dedicated to the doers, the builders, the change makers and all the founders.”

She went on to share the poem.