In the market of skincare and personal care products, Mamaearth stands as a prominent household name. The brand has gained significant attention due to its recent disclosure of its Initial Public Offering (IPO), which is set to begin trading from October 31 to November 02. The Mamaearth IPO has been making waves in the financial world, with projections of raising a staggering ₹1701 crores by offering up to 41,248,162 shares at ₹10 apiece, along with a fresh ₹365 crore issue. To further understand this captivating journey, let’s delve into the intricacies, challenges, and unanswered questions that surround Mamaearth’s IPO.
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The Complex Makeup of Mamaearth IPO
Mamaearth’s IPO Date encompasses a fresh share issue of ₹365 crores, accompanied by an offer for sale (OFS) involving approximately 4.12 crore shares. Notably, Varun Alagh, the Honasa promoter, plans to sell 3,186,300 shares during the IPO, while Ghazal Alagh, his spouse, may offer up to 100,000 shares. Additional investors participating in the OFS include Kunal Bahl, Shilpa Shetty Kundra, Rishabh Harsh Mariwala, Fireside Ventures Fund, Sofina, Stellaris, and Rohit Kumar Bansal.
The funds generated from Mamaearth’s IPO will be allocated towards several critical objectives. These objectives include covering advertising expenses to enhance brand visibility, establishing new Exclusive Brand Outlets (EBOs), fulfilling general business needs, supporting an undisclosed inorganic acquisition, and providing financial backing to Mamaearth’s subsidiary, Bhabani Blunt Hairdressing Private Limited (BBlunt), for the expansion of additional salons.
The Startup IPO Ecosystem: A Unique Perspective of Mamaearth IPO
Before diving into the specifics of Mamaearth’s IPO, it’s vital to comprehend the broader context of startup IPOs. Startups follow a distinctive operational pattern, prioritizing growth over immediate profitability, which distinguishes them from traditional business models. India boasts a burgeoning startup landscape, home to 114 unicorns, although only 80 of these unicorns share their financial data. Strikingly, just 17 of these startups are currently in profit, raising questions about how they sustain themselves and attract investors.
Mamaearth IPO GMP: A Measure of Interest
The Grey Market Premium (GMP) for Mamaearth’s IPO currently stands at ₹30. GMP, also known as the IPO Grey Market Premium, Kostak, and Subject to Sauda rates, provides valuable insight into market sentiment and investor interest. It’s essential to note that GMP is time-sensitive and specific to the date mentioned in the header.
Key IPO Details:
IPO Open: October 31, 2023
IPO Close: November 2, 2023
IPO Size: Approx ₹1701 Crores
Fresh Issue: Approx ₹365 Crores
Offer for Sale: Approx 41,248,162 shares
Face Value: ₹10 Per Equity Share
IPO Price Band: ₹308 to ₹324 Per Share
Basis of Allotment: November 7, 2023
Refunds: November 8, 2023
Credit to Demat Account: November 9, 2023
IPO Listing Date: November 10, 2023
Retail Quota: 10%
QIB Quota: 75%
NII Quota: 15%
Mamaearth IPO Listing on: BSE & NSE
While GMP can provide valuable insights, it’s crucial to exercise caution and not base your IPO investment solely on premium prices, as these rates may fluctuate before listing. Comprehensive research on the company’s fundamentals is strongly advised before subscribing.
How to Check Mamaearth IPO Allotment Status?
To check your allotment status for Mamaearth IPO, follow these simple steps:
Visit the official website of the registrar or the stock exchange where Mamaearth IPO is listed.
Navigate to the “IPO Allotment” or “Allotment Status” tab.
Enter your Permanent Account Number (PAN) along with your Application ID (ID Client) or DP ID.
After you submit the information, the website will display your allotment status, indicating whether or not you have been awarded shares.
In addition, if accessible, you may use the registrar’s official mobile app or the net banking page of your bank to monitor the status of your allocation.
Mamaearth IPO Allotment & Listing Dates
The Mamaearth IPO kicks off on October 31 and concludes on November 2. On November 7, the IPO allocation process will be finalized, with the IPO listing set for November 10.
Offer for Sale (OFS) Details
Ghazal Alagh intends to offer up to 100,000 shares, while Varun Alagh, the Honasa promoter, plans to sell 31,86,000 shares. Several other shareholders are also partaking in the OFS, including Kunal Bahl, Shilpa Shetty Kundra, Rishabh Harsh Mariwala, Fireside Ventures Fund, Sofina, Stellaris, and Rohit Kumar Bansal.
Mamaearth IPO Market Lot
The minimum market lot for Mamaearth IPO comprises 46 shares, with an application fee of ₹14,904. Retail investors have the opportunity to submit applications for up to 13 lots, totaling 598 shares, or ₹193,752.
Retail Minimum: 46, ₹14,904
Retail Maximum: 598, ₹193,752
S-HNI Minimum: 644, ₹208,656
B-HNI Minimum: 3128, ₹1,013,472
Mamaearth IPO Limited IPO Buy or Not
The decision of whether to invest in Mamaearth IPO Limited hinges on your investment objectives, risk tolerance, and thorough market research. It is imperative to assess the company’s financial health, growth prospects, and valuation, considering the rising demand for sustainable and eco-friendly products and the company’s position in this market.
Mamaearth IPO: The Profit Paradox
Startup profitability is often a perplexing matter. Startups, including Mamaearth manage to pay salaries, invest in marketing, and expand operations despite not being profitable. This financial paradox is resolved by attracting funding from private investors, primarily through venture capital and private equity investments.
Mamaearth, like many startups, experienced rapid sales growth. Their revenues soared from 114 crores to an astounding 964 crores in only three years. However, there’s still a significant distinction between profitability and sales figures.
In 2020, Mamaearth reported a loss of 442 crores, despite generating sales of 114 crores. In the following year, their losses soared to 1332 crores, despite tripling their sales to 442 crores. It was only in the third year, with sales reaching 964 crores, that Mamaearth managed to achieve a meagre profit of 14 crores.
Valuation: A Balancing Act
Mamaearth’s ambitious IPO valuation has garnered considerable attention. They sought a substantial 24,000 crores for just a 10% stake in the company. To put this in context, their worth was $1.2 billion a year ago, which is comparable to 10,000 crores.
This substantial jump in valuation, while not uncommon in the startup world, raised questions about whether Mamaearth’s on-paper worth truly mirrored its financial stability.
P/E Ratio: A Crucial Metric
Investors often evaluate a company’s value by examining its Price-to-Earnings (P/E) ratio, measuring the relationship between a company’s stock price and its earnings per share. Lower P/E ratios are typically more attractive to investors. In comparison, established companies like ITC, Dabur, and HUL boast P/E ratios of 23, 58, and 62, respectively. In stark contrast, Mamaearth’s proposed P/E ratio stood at a staggering 1700, significantly higher than that of Adani, a company that has faced its share of scrutiny.
The Risks and Challenges
Mamaearth’s IPO journey encountered several risks and challenges, some of which raised serious concerns. These factors include:
Stable ROAS (Return on Ad Spend): Mamaearth’s ROAS remained consistently low at 2.6 for the past three years, indicating a lack of customer retention, a critical aspect of sustainable growth.
Over Reliance on E-commerce: A majority of Mamaearth’s sales are generated through online channels. Their profit margin is significantly affected by the discounts offered by platforms like Amazon. A change in these platforms’ terms could jeopardise Mamaearth’s financial stability.
Lack of Manufacturing Control: Mamaearth relies on contract manufacturers for production, exposing the company to potential supply chain disruptions.
Premium Pricing: Mamaearth’s products are positioned at a premium price point, potentially limiting their market reach to a smaller, more affluent consumer base, despite India’s vast population.
Mamaearth IPO: The Verdict
Mamaearth’s IPO journey, while captivating, is not without its challenges and uncertainties. Investors and potential stakeholders must carefully weigh the risks and rewards of the company’s growth trajectory.
As Mamaearth reevaluates its IPO plans and seeks to address the issues highlighted in this article, only time will tell whether they can regain the confidence of investors and the public.
In conclusion, while Mamaearth’s products have won the hearts of many, their journey to becoming a public company is a path filled with obstacles and complexities. Whether or not they succeed in their IPO quest remains a topic of great interest and speculation in the business world.
Disclaimer: The information in this “Stock Profile” blog post is for informational purposes only. It is not financial advice. Always consult a qualified expert before making investment decisions.