Honasa Consumer Limited – IPO Note – Equity Research Desk

October 30, 2023 . Equities Desk

Company Overview:

Honasa Consumer Limited is a digital-first house of brands catering to the diverse needs of millennial customers. The company is building a new generation of beauty and personal care brands – driven by purpose, powered by technology, and focused on evolving consumer needs. From natural personal care to science-backed skincare and a modern take on Ayurveda, each of their brands has a unique proposition, created for millennials. Honasa Consumer’s in-house portfolio of brands comprises household favorites like Mamaearth, The Derma Co., Aqualogica and Ayuga. They have also made strategic acquisitions to strengthen company portfolio – BBlunt (Products and services), Dr Sheth’s (dermatologist formulated skincare brand).

Objects of the Offer:

  • Advertisement expenses towards enhancing the awareness and visibility of brands;
  • Capital expenditure to be incurred by Company for setting up new EBOs.
  • Investment in Subsidiary, Bhabani Blunt Hairdressing Private Limited (“BBlunt”) for setting up new salons.
  • General corporate purposes.

Investment Rationale:

  • Technology and data capabilities: Honasa Consumer Since launching Mamaearth in 2016, the brand, Mamaearth, is built to service a core customer need for safe-to-use, natural products, and focuses on developing toxin-free beauty products made with natural ingredients. Honasa Consumer Limited intend to continue to invest in technology and data capabilities to drive business efficiencies, stay connected with consumers and strengthen cross-brand, cross-functional synergies. The company intends to further refine personalization engine to deliver a more tailored, contextualized experience to users, deepen brand connect and drive consumer retention and repeat. In June 2022, the company launched an integrated sampling platform, YOTO Box, to enable them to generate trials across brands in portfolio and drive cross-selling, with the aim of capturing a higher share of wallet and customer lifetime value at a company level in the future.
  • Strong professional management: Organization is led by visionary founders, Varun Alagh (CEO) and Ghazal Alagh (CIO). Prior to founding Company, Varun worked across marquee companies in India such as Hindustan Unilever, Diageo India Private Limited and Coca-Cola India Private Limited. Ghazal worked with NIIT and operated, an independent commercial operation. Ghazal has been associated with Company as a promoter and director since September 16, 2016. Together, their knowledge and understanding of the consumer-packaged goods and BPC products space in India has been instrumental in developing and growing business.
  • Financial Track Record: The company reported a revenue of Rs. 1493 crore in FY23 as against Rs. 943 crores in FY22. The revenue has grown at a CAGR of 80.14% between Financial Years 2021 and 2023. The EBITDA of the company in FY23 is at Rs. 23 crore and EBITDA margin is at 1.52%. The company has posted a net loss of (- Rs. 151 crores) in FY23. For Q1FY24, it earned a net profit of Rs. 24.72 crores, on a revenue of Rs. 464 crores.  

Key Risks:

  • Dependent on Third Party – Company outsources the manufacturing of all the products to third-party manufacturers, primarily under non-exclusive contract manufacturing arrangements, and does not own any manufacturing facilities. The company’s dependence on third-party manufacturers for all the products subjects it to risks, which, if realized, could adversely affect the business, results of operations, cash flows and financial condition. Dependent on several third-party service providers to sell or distribute its products to consumers, and on third party technology providers for certain aspects of its operations. Any disruptions or inefficiencies in these operations may adversely affect the business, financial condition, cash flows, and results of operations.
  • OFS – The IPO will see the sale of 3,186,300 shares by Honasa promoter Varun Alagh and up to 100,000 shares by his wife Ghazal Alagh. A number of other shareholders, including Kunal Bahl 1,193,250 shares, Shilpa Shetty Kundra 1,393,200 shares, Rishabh Harsh Mariwala 5,700,188 shares, Fireside Ventures Fund 7,972,478 shares, Sofina 9,566,974 shares, Stellaris 10,942,522 shares, and Rohit Kumar Bansal 1,193,250 shares, will be selling their stakes in the OFS.


Honasa Consumer Limited is the largest digital-first beauty and personal care (“BPC”) company in India in terms of revenue from operations for the Financial Year 2023. According to RHP, the company’s listed peers are Hindustan Unilever Limited, Colgate Palmolive (India) Limited, Procter & Gamble Hygiene and Health Care Limited, Dabur India Limited, Marico Limited, Godrej Consumer Products Limited, Emami Limited, Bajaj Consumer Care Limited and Gillette India Limited. The peers are trading at an average P/E of 54x with the highest P/E of 83x and the lowest being 26x. At the higher price band, the listing market cap of Honasa Consumer will be around ~Rs.10425 crore. The company is trying to be profitable (Historically it has more loss-making quarters) it is not effective to compare with the above peers as of now.  We should wait for few more quarters to see whether the company starts making stability in profitability. Based on the above views, we provide a ‘Neutral‘ rating for this IPO for a medium to long-term Holding.

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