Honasa plunges 15% further; mcap drops Rs1,300 crore since listing

The company reported a net loss of Rs 150.9 crore during the year ended March 2023, impacted by the impairment loss on goodwill and other intangible assets

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Honasa Consumer Ltd, the Mamaearth parent company saw its shares decline by nearly 15 percent on November 10, reaching a new record low. The stock has now dropped by 21 percent from its initial issue price of Rs 324 per share, leading to a market capitalisation loss of over Rs 1,300 crore.

The stock hit a record low of Rs 256.10 a share and fell as much as 15 percent in intraday. At 10.30am, the stock was trading at Rs 279 on the BSE, down 7.5 percent from its previous close.

The stock has been on a continuous decline since its listing on November 7. Several analysts have advised avoiding the IPO, citing aggressive pricing.  It raised around Rs 1,700 crore via IPO.

The company reported a net loss of Rs 150.9 crore during the year ended March 2023, impacted by the impairment loss on goodwill and other intangible assets, against a profit of Rs 14.4 crore in the previous year.

The volume growth fell significantly to 68.23 percent in FY23 from 143.3 percent in FY22 and 298.42 percent in FY21. However, revenue from operations grew at a CAGR of 80.14 percent during FY21-FY23.

Analysts noted that Honasa has built consumer trust and brand resonance, exemplified by Mamaearth’s rapid rise in India’s DTC BPC sector in just six years. With a solid gross margin of over 70% and an asset-light model, the company has shown remarkable growth in the past five years. However, while achieving profitability, concerns remain about sustaining earnings growth and strengthening the bottom line.

“Based on its annualized FY24 EPS, the IPO appears to be aggressively priced at 97x, discounting all immediate positive factors and seems like the company is leveraging its proven track record to justify a premium valuation. We, therefore, recommend an “AVOID” rating for the issue and would revisit the company following consistent and sustainable improvement in profitability”, said BP Wealth in its note.

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