Mamaearth parent Honasa Consumer shares tumble over 15%, but Jefferies sees over 70% upside

Mamaearth shares, Mamaearth IPO: Shares of Honasa Consumer, the parent company of Mamaearth, slipped over 15 per cent in the morning deals on Friday, November 10, to touch the day's low of Rs 256.1 apiece on the BSE. The stock made its debut on bourses on Tuesday, November 7. It was listed at Rs 330 per share, a 1.85 per cent premium to the issue price.

Last seen, shares of Honasa Consumer were down 9.33 per cent to Rs 273.95 apiece, which is lower than its listing price. The market capitalisation of the company stood at Rs 9,210 crore.

Since its listing at Rs 330 per share, Honasa Consumer shares have slipped over 15 per cent. The stock has lost 21 per cent from its issue price of Rs 324 to hit its new low.

The initial public offering (IPO) of Honasa Consumer opened for subscription on October 31 and concluded on November 2.

IPO proceeds from the fresh issue were to be utilised towards advertising expenses to improve awareness and brand visibility, setting up new exclusive brand outlets, investment in its subsidiary BBlunt for setting up new salons, general corporate purposes, and inorganic acquisitions.

On the last day, the IPO of Honasa Consumer was subscribed 7.61 times. The Rs 1,701.44 crore IPO received bids for 22,00,35,710 shares against 2,88,99,514 shares put on offer, according to the NSE data.

The category for qualified institutional buyers (QIBs) was subscribed 11.50 times, while the non-institutional investors' quota got 4.02 times subscription. The portion for retail individual investors (RIIs) got subscribed 1.35 times.

Jefferies' view on Honasa Consumer  

Jefferies has initiated a high conviction 'buy' on Honasa Consumer with a target price of Rs 520 apiece, which translates to an upside of around 73 per cent from the current market price.

The brokerage expects an industry-leading growth of the company by 27 per cent in the next three years and believes that the growth of new brands will be strong, with 33 per cent income from offline and new brands. Growth shall be supported by increasing offline business.

Jefferies expects the company's margins to increase to double digits in FY26E and valuations to be 6x FY25E EV/Sales. According to the brokerage, company valuations on EV/sales are at a discount as compared to peers.

About Honasa Consumer 

The Gurugram-based beauty and personal care company was founded in 2016 by the husband-wife duo Varun and Ghazal Alagh. It began with the launch of Mamaearth, and over the years it added five more brands to its portfolio, including The Derma Co, Aqualogica, Ayuga, BBlunt, and Dr Sheth's, and built a 'House of Brands' architecture.

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