The initial public offering (IPO) of Honasa Consumer, the parent company of popular beauty and personal care brand Mamaearth, witnessed a subscription rate of 12% on the first day of the bidding process. Investors purchased 36.07 lakh equity shares out of the total offer size of 2.89 crore shares.
Retail investors displayed strong interest, subscribing to 34% of the shares allocated to them, while high net worth individuals (non-institutional investors) secured 3% of the reserved portion. The segment set aside for qualified institutional buyers (QIBs) experienced a 10% subscription rate.
IPO Structure
The offering features a breakdown where 75% of the net issue size is reserved for qualified institutional buyers, 15% for high net worth individuals, and the remaining 10% for retail investors. Additionally, employees with shares valued at Rs 1 crore reserved in the IPO have shown a keen interest, subscribing at a rate of 1.97 times the allocated quota. It’s important to note that this offering, excluding employees’ shares, constitutes the net issue.
Employees will benefit from a discount of Rs 30 per share compared to the final issue price. The price range for the IPO, which will remain open for subscription until November 2, has been set at Rs 308-324 per share.
Use of Proceeds
Honasa aims to raise Rs 1,701 crore through its maiden public issue. This comprises a fresh issuance of shares worth Rs 365 crore by the company and an offer-for-sale (OFS) of 4.13 crore equity shares by select shareholders, including Sofina, Stellaris, Kunal Bahl, Rohit Kumar Bansal, and Shilpa Shetty Kundra.
Of the net fresh issue proceeds, the Gurugram-based direct-to-customer firm intends to allocate Rs 182 crore towards advertising expenses to enhance brand awareness and visibility. Another Rs 20.6 crore will be earmarked for establishing new exclusive brand outlets (EBOs).
Furthermore, the company will invest Rs 26 crore in its subsidiary, BBlunt, for the establishment of new salons. The remainder of the proceeds will be directed towards general corporate purposes and undisclosed inorganic acquisitions.
Anchor Investors
On October 30, a day before the IPO opening, Honasa successfully raised Rs 765.2 crore from various anchor investors. Notable names among these investors include Smallcap World Fund Inc, Fidelity Funds, Abu Dhabi Investment Authority, Government Pension Fund Global, Carmignac Portfolio, Goldman Sachs, ICICI Prudential Mutual Fund, Aditya Birla Sun Life Trustee, Axis Mutual Fund, Whiteoak Capital MF, SBI Life Insurance Company, Aditya Birla Sun Life Insurance Company, and ICICI Prudential Life Insurance Company.
However, the grey market for the IPO seemed less enthusiastic, as analysts reported that the IPO shares were available at just a 2% premium over the upper price band. The grey market operates unofficially, enabling trading of IPO shares until their official listing.
Conclusion
The Honasa Consumer IPO has shown moderate interest from investors on its opening day, with a 12% subscription rate. Retail investors have played a significant role in this early success, while high net worth individuals and QIBs have also participated. Honasa aims to utilize the funds raised for expanding brand visibility, establishing new brand outlets, and investing in subsidiaries. While anchor investors have shown support, the grey market seems cautious in its assessment of the IPO’s prospects.
Please note that the figures and subscription rates mentioned in this article are based on the available information as of October 31, 2023, and may be subject to change.