IPO: Honasa Consumer Limited

Honasa Consumer, one of the largest digital-first beauty and personal care companies with a recognised brand, 'Mamaearth', has launched its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses and growth prospects to help investors make an informed decision. In a nutshell Quality : The company has inconsistent profits combined with a low return on capital. Growth : The company's revenue has grown at 80 per cent per annum in FY21-23. Valuation : The stock will be priced at a P/B of 10.454 times respectively, compared to its peers' average P/B of 17.4 times, respectively. P/E is not applicable due to negative earnings. Overview : It is raising money for marketing and for investment in new exclusive business outlets and to invest in its subsidiary. The company looks to ride the growth in the BPC segment in India. About Honasa Consumer Honasa Consumer, launched in 2016, is a Beauty and Personal Care (BPC) company with a 29 per cent market share in the direct-to-consumer segment and a 2 per cent share in the overall BPC segment. It houses some famous brands such as Mamaearth, Derma, Aqualogica, and more. The company's product offerings include baby care, face care, body care, hair care, and more. Strengths of Honasa Consumer Strong brand presence: The company houses some of the most well-known brands in the beauty and personal care industry, such as Mamaearth, Derma, Aqualogica, and more. Strong online presence: While it has an omnichannel network, most of its business is conducted online. This makes the company relatively asset-light, too. Weaknesses of of Honasa Consumer Reliance on marketing: The company highly depends on high marketing costs in order to be visible among its peers. While, on average, advertising already accounts for 39 per cent of revenue, it cannot afford to bring it down in the future either. Inconsistent financials: While the company's top-line growth has been impressive, it has been recurring losses and has inconsistent cash flows, which also affects its return on capital. Competitive environment: The company shares its consumer base with many established players with huge market share, causing them to always maintain a huge expenditure in promotion and marketing. IPO details Total IPO size (Rs cr) 1701.44 Offer for sale (Rs cr) 1336.44 Fresh issue (Rs cr) 365 Price band (Rs) 308-324 Subscription dates Oct 31 to Nov 2, 2023 Purpose of issue Advertisement, capex on new EBOs, and investment in subsidiary Post-IPO M-cap (Rs cr) 10425 Net worth (Rs cr) 1003 Promoter holding (%) 35.3 Price/earnings ratio (P/E) - Price/book ratio (P/B) 10.4 Financial history Key financials 2Y CAGR (%) TTM FY23 FY22 FY21 Revenue (Rs cr)