Gurgaon based direct to consumer brand Mamaearth in India to reach an annual revenue of ₹1,000 crore (in the preceding 12 months) within six years of launch.

MUMBAI, 13^th SEPTEMBER, 2023 (GPN): Honasa Consumer Limited, owner of its flagship brand Mamaearth is planning to expand its physical store network and add EBOs (exclusive brand outlets) and stores across malls and high street outlets across both existing and new cities and towns in India.

Gurgaon based direct to consumer brand Mamaearth’s Owner and IPO-bound Honasa Consumer is the largest digital-first beauty and personal care (“BPC”) company in India in terms of revenue from operations for the Financial Year 2022 (Source: RedSeer Report) as per its offer document filed with the regulator. Out of the fresh issue proceeds of Rs. 400 crore from the proposed IPO, it has earmarked a total of around Rs. 62 crore comprising Rs. 34.23 crore as capex for setting up new EBOs and Rs. 27.52 crore for setting up new salons of BBlunt.

Honasa Consumer, which achieved Unicorn status (billion dollar valuation), should be seen more of a new-age FMCG House of Brands company powered by technology rather than a pure-play tech start-up or new economy company, as per informed analysts tracking the company.

Since launching Mamaearth in 2016, Honasa Consumer has added five new brands to its portfolio, namely The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s, to build a ‘House of Brands’ architecture, as per the DRHP.

The House of Brands already serves 718 districts and 18,323 pin codes and 45.93% of its volumes are from Tier 2 cities. It has 35 EBOs and 9 salons, which are backed by 1,388 beauty advisors and 30 MT chains. It has 449 distributors, super distributors and sub-stockists. The offline business revenues had a CAGR of 423.4% (FY20-22).

Between Financial Years 2020 and 2022, Honasa Consumer has grown its offline channel over 27 times, and according to NielsenIQ’s Retail Measurement System, for the period of September 2022, it is estimated to have retailed products through 112,868 FMCG retail outlets in India as per the DRHP.

Honasa Consumer has grown its revenue from operations at a CAGR of 193.15% between Financial Years 2020 and 2022 (from ₹109.78 crore in Financial Year 2020 to ₹943.47 crore in Financial Year 2022), while the median revenue CAGR of all other BPC companies for which data was available for the relevant period was 13% (Source: RedSeer Report).

Honasa Consumer is backed by globally recognised marquee Private Equity (PE) players such as Sequoia (which is not making any exit in IPO and continues to stay invested), Fireside, Stellaris, Belgium-based Sofina and UAE based Evolvence among others. Sequoia continued to invest right up to 2022 even as Honasa Consumer was declared as Unicorn.

Since inception, Honasa Consumer has worked with the primary objective of developing products that address beauty and personal care problems faced by consumers. Honasa Consumer’s flagship 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. According to the RedSeer Report, as of September 30, 2022, Mamaearth has emerged as the fastest growing BPC brand in India to reach an annual revenue of Rs. 1,000 crore (in the preceding 12 months) within six years of launch.

The beauty and personal care (BPC) products market in India is undergoing a fundamental re-industrialization owing to the convergence of technology, demographic dividend, and growing consumer aspirations. Moreover, the market for BPC products in India is expected to grow from approximately $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 during this period. India’s per capita spend on BPC products is currently one of the lowest in comparison to some of the other developing countries and is at the cusp of growth as GDP per capita nears $2,000, which is a critical inflection point as observed in other developing economies.

As of September 30, 2022, Honasa Consumer’s portfolio of brands with differentiated value propositions includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments.

Honasa built its business by focusing on driving profitable unit economics, as demonstrated by the following (Source: RedSeer Report). It was ranked second amongst digital-first BPC companies in India in terms of gross profit margins in Financial Year 2021. It was one of the two digital-first BPC companies in India with a positive adjusted EBITDA margin (defined as EBITDA adjusted for a change in fair valuation of preferences shares, share based payment expenses (equity settled) and share based payment expenses (cash settled)) in Financial Year 2021.

Honasa Consumer has a dedicated in-house start-up team called “Brand Factory” that closely works with our founders and is responsible for end-to-end ideation, incubation and execution of new brands. The team actively identifies opportunities to optimize operations for the new brands by capitalizing on synergies from our House of Brands architecture.

Honasa had filed its preliminary IPO papers with the Sebi in December 2022.

According to the draft papers, Honasa Consumer’s proposed IPO comprises a fresh issue of equity shares worth up to ₹400 crore and an (OFS) of up to 4,68,19,635 shares by promoters and existing shareholders.

The shareholders in the OFS would include founders Varun and Ghazal Alagh as well as investors such as Sofina, Fireside Ventures, Evolvence India, Stellaris and angel investors such as Snapdeal founders Kunal Bahl and Rohit Bansal, Rishabh Mariwala of FMCG giant Marico and actor Shilpa Shetty Kundra.In March, Honasa CEO Varun Alagh had told GPN that its largest investor, Sequoia, would not be selling any shares in the IPO and the founders would own more than 97% of their shares after the IPO.The company, which operates brands such as The Derma Co and BBlunt in addition to Mamaearth, was valued at $1.2 billion when it raised $52 million in January last year in a round led by Peak XV Partners (then Sequoia Capital India).

The company, backed by investors such as Sequoia Capital and Belgium’s Sofina, was founded in 2016 by the couple Varun and Ghazal Alagh.

Honasa Consumer makes its products available to customers through omni-channel distribution networks across both online and offline touchpoints. Once a product or brand reaches a mature stage, it selectively introduces such products and brands in offline stores to drive penetration amongst a larger consumer base. It has established scale across both online and offline channels and recorded the highest revenue from offline channels among digital-first BPC companies in India in Financial Year 2022 (Source: RedSeer Report).Ends