Honasa Consumer, the parent company of direct-to-consumer beauty and personal care brand Mamaearth plans to utilise its initial public offering (IPO) proceeds of Rs 2,900 crore on marketing initiatives and expanding its offline reach across key brands.
The proceeds will be for advertisement expenses towards enhancing the awareness and visibility of its brands, capital expenditure for setting up new exclusive brand outlets (EBOs), investment in company’s subsidiary BBlunt (Bhabani Blunt Hairdressing) for setting up new salons, and general corporate purposes and unidentified inorganic acquisition.
According to the company’s DRHP (draft red herring prospectus), the company will utilise `186 crore from the net proceeds towards marketing initiatives over the next four years.
Apart from Mamaearth, Honasa runs five more brands called The Derma Company, Aqualogica, Ayuga, Dr Sheth, and BBlunt.
Honasa plans to open 132 new EBOs across India through a mix of mall stores and high street outlets by financial year 2026 and proposes to utilise `34.2 crore from the net proceeds towards the expansion.
The company incurred capital expenditure of around `52 lakhs during financial year 2022 and `1.4 crore during the six month period ended September 30, 2022, comprising 0.06% and 0.19% of Honasa’s revenue of operations for the respective periods.
The company also proposes to utilise `27.5 crore out of the net proceeds towards investment in BBlunt for the purpose of setting-up 20 new salons of till 2026. As of September 30, 2022, there are nine Blunt salons across two districts in India.
In addition, the amount to be utilised for general corporate purposes and unidentified inorganic acquisition will not exceed 35% of the net proceeds.
The amount to be utilised for general corporate purposes alone shall not exceed 25% of the net proceeds.
In the year ended March 31, 2022, the company reported a profit of `14.4 crore, versus a restated loss of `1,332 crore in FY21 and `428 crore in financial year ended March 2020. The company doubled its revenue from operations to `943 crore from `459 crore in FY21, and `109 crore in financial year 2020. For the six months period ended September 30, 2022, the revenue stood at `723 crore.
The market for beauty and personal care products in India is expected to grow from around $17 billion in 2021 to approximately $30 billion in 2026 at a CAGR of approximately 12%, which is among the highest within the broader retail categories and faster than other retail categories in India during this period, according to RedSeer. The beauty and personal care products market lends itself well to digital penetration and the online beauty and personal care market, which is currently sized as $2.5 billion, is expected to grow at 27% annually to be around $8.4 billion by 2026, translating to an online penetration of 28%.