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Mamaearth’s parent, Honasa Consumer, has opened its IPO for subscription, creating a buzz in the investment world. Before jumping on the investment bandwagon, it’s crucial to evaluate the potential risks associated with this IPO. The company has outlined these risks in its Red-Herring Prospectus (RHP), and here we provide a comprehensive analysis to aid potential investors in making an informed decision.
Mamaearth IPO Subscription Details
- Subscription Period: October 31 to November 2
- Capital Raised from Anchor Investors: ₹765.20 crore on October 30
- Price Band: ₹308-324 per equity share
- Valuation: ₹10,424.53 crore at the upper price band
- Offer Details: 4.12 crore shares in OFS and fresh share issuance of up to ₹365 crore
- Expected Raise: ₹1701.44 crore at upper price band
Subscription Status (Day 1)
- Overall: 3%
- Retail Investors: 14%
- Non-Institutional Investors (NII): 1%
- Qualified Institutional Buyers (QIB): Yet to subscribe
- Employees: 1.05 times
Share Reservation
- QIB: 75%
- NII: 15%
- Retail Investors: 10%
- Employee Discount: ₹30 per equity share
Top 10 Key Risks
- Historical Losses: The company reported losses in FY 2021 and 2023, which could impact the value of equity shares.
- Dependence on Mamaearth Brand: Significant revenue comes from Mamaearth-branded products. A decline in their market could hurt the company’s financial health.
- High Advertising Costs: Previous increases in revenue were fueled by high advertising costs, a trend that might not be sustainable.
- Celebrity-Dependent Marketing: Heavy reliance on celebrities and influencers could backfire if public opinions shift.
- Online Sales Vulnerability: Sales depend on agreements with specific marketplaces; any disruption could affect operations.
- Intense Competition: Market share loss, increased marketing expenses, and the necessity for discounts could reduce profitability.
- Potential Pricing Discrepancies: The price band and offer price might not accurately reflect market conditions, creating uncertainty.
- Offline Sales Network: Failure to grow or manage the offline sales network could hinder the company's expansion.
- Dependence on Third-Party Services: Any inefficiency or disruption in services from third-party providers and technology suppliers could impact operations.
- External Legal and Economic Factors: Changes in Indian law, credit ratings, and inflation could negatively affect the business.
Mamaearth IPO GMP Today
- Grey Market Premium (GMP): +7
- Estimated Listing Price: ₹331 per share (2.16% higher than the IPO price of ₹324)
Conclusion
While the Mamaearth IPO offers an exciting investment opportunity, it’s imperative for investors to meticulously analyze the associated risks and market conditions. The company’s historical losses, dependence on the Mamaearth brand, and vulnerability to external factors are noteworthy considerations. It’s advisable for potential investors to conduct thorough research and seek professional advice if necessary to ensure a sound investment decision.
