Quiet Debut for Mamaearth Stocks; What Should Investors Do?
Consumer products company Honasa Consumer, the parent company of Mamaearth, has seen a muted start on the bourses with a listing of a mere 2% premium. The stock debuted on the NSE at a price of Rs. 330 per share, which translates into a 1.85% premium, while on the BSE, the listing was at par with the issue price, i.e., Rs. 324.
The company”s IPO received only muted responses on the first two days before being subscribed 7.61 times more on day three. Retail investors subscribed 1.35 times more than their quota, while the NII portion was subscribed 4.02 times. Qualified Institutional Buyers (QIBs) subscribed 11.50 times, and the employee portion was subscribed 4.87 times.
On day one, investors subscribed merely 13%. Before that, the subscription had been limited to 70%. “We are living a dream, which we never thought of until 2.5 years ago,” Mamaearth founder Ghazal Alagh said, ahead of Mamaearth”s shares being listed, as reported by Moneycontrol.
IPO Details
Mamaearth was able to secure Rs. 765 crore from anchor investors ahead of the IPO. Investors in the anchor book include Smallcap World Fund, Fidelity Funds, Abu Dhabi Investment Authority, and Goldman Sachs. The company has allocated 2.36 crore shares at Rs. 324 apiece for the anchor portion. It has also allocated shares worth Rs. 253.6 crore to domestic mutual funds. “Seven domestic mutual funds have applied through a total of 19 schemes,” the company said in an exchange filing.
Mamaearth”s IPO consisted of a fresh issue of shares worth Rs. 365 crore and an offer for sale (OFS) of up to 4.12 crore shares. Those offering shares in the OFS include promoters and founders Varun Alagh and Ghazal Alagh, and investors like Fireside Ventures, Sofina, Stellaris Venture Partners, Snapdeal co-founders Kunal Bahl and Rohit Kumar Bansal, Rishabh Harsh Mariwala, and Bollywood actor Shilpa Shetty Kundra.
In total, the company raised Rs. 1701 crore at a price band of Rs. 308-Rs. 324.
Buy or Sell?
Analysts hold a cautious stance on Mamaearth”s IPO. Shivani Nyati, Head of Wealth, Swastika Investmart Ltd., urges investors to book profits and exit their positions, while Prashanth Tapse, Sr. VP Research analyst at Mehta Equities, suggests that conservative investors book profits. According to him, only risk-takers would hold the share given the company”s muted performance over the last period.
The factors that raise concerns include the loss-making nature of the business, a high portion of OFS, high competition with margin pressure, a low promoter stake, and weak financials.
