Another unicorn going public

One of the unicorns of 2022, Honasa Consumer (or popularly known as 'Mamaearth'), has plans to go public. A direct-to-consumer (D2C) beauty and personal care company, Mamaearth, becomes the last company in the calendar year 2022 to have planned for an IPO.

In the beauty and personal care section, Mamaearth develops products in the baby care, face care, body care, hair care, colour cosmetics and fragrances segments. The company has a portfolio of six brands.

Mamaearth plans to raise Rs 400 crore via fresh issue of shares for advertisement spends, capex plans, investment in a subsidiary and inorganic acquisitions. The IPO also has an offer-for-sale (OFS) component of around 4.7 crore shares by promoters and selling investors.

Financials
The topline has been growing at a rapid pace, however the company is finding it difficult to post profits at the same pace. Mamaearth has seen profits in just one year out of the past three financial years. The year in which the company turned into a unicorn was the only year when the company generated a profit as revenue more than doubled from FY21 to FY22.

Since the company makes 70 per cent of its revenue via online channels, advertisement is a major expenditure for the company. Nearly 40 per cent of the revenue is spent on advertisement expenses every year. Even then, the return on ad spend has been constant at the same levels in the past three years.

Return on ad spend refers to the amount of revenue that is earned for every rupee spent on advertisements. It is calculated by dividing the revenue to the advertisement spends in a given year. Ideally, this number should be on an upward trajectory.

Moreover, the company plans to spend 46.5 per cent of the fresh issue towards advertisement expenses.

Disclaimer: This isn't the IPO analysis that we usually do. We will cover the entire IPO analysis separately once the price band is fixed.

Suggested read: Winners and losers of 2022's IPOs