Honasa Consumer, the company that owns new age FMCG brands such as Mamaearth and The Derma Co, is planning to raise Rs 400 crore from its IPO. The funds raised will be invested in offline expansion, bringing new brands to the market, and acquisitions. Varun Alagh, the Co-founder and CEO of Honasa Consumer, said that the company will focus on expanding the scale of its flagship brand Mamaearth, as well as scaling its other brands such as The Derma Co, Aqualogica, and Ayuga. These brands are performing well and growing their monthly revenue.
The company’s salon business BBlunt, which was acquired from Godrej Consumer Products, exclusive brand outlets, overseas expansion to geographies such as the Middle East, and newer categories will be the newer engines of growth. Earlier this month, markets regulator SEBI approved Honasa Consumer’s proposal to raise funds through an initial public offering (IPO).
Alagh said that the company is looking to raise around Rs 400 crore in primary capital through the IPO. In addition, there will be an Offer for Sale (OFS) component through which some of the company’s early investors will sell their shareholding. The funds raised from the IPO will be used for expansion and general corporate purposes.
One objective of the IPO is to invest in capex for opening more stores and salons. Another objective is marketing to bring more brands to the market. The third objective is general corporate expenses, which would include things like acquisitions. According to Honasa Consumer’s DHRP, its revenue from operations was Rs 943.46 crore for the financial year that ended on March 31, 2022, and it had a restated profit of Rs 14.44 crore.
Mamaearth was the fastest brand to become a Rs 2,000 crore brand in the D2C landscape in India. When asked about the timing of the IPO, Alagh said that for a good company, there are no bad times. He believes that with FPI coming back to India and geopolitical factors as well as consumer demographics and economic growth, there is going to be a lot of growth in the Indian economy and markets.
Alagh is excited and confident about being able to generate strong interest in the company as it goes for its IPO. Honasa Consumer started its offline expansion about three years ago. According to Alagh, this has been a “phenomenal” journey for a company that started with D2C offerings.
Offline sales now contribute to 35% of Honasa Consumer’s revenues. The company has more than 400 distributors across over 100 cities, and its products are available in over 100,000 outlets, according to AC Nielsen. Honasa Consumer has also seen strong share gains in categories like face wash and shampoo in the offline space. Varun Alagh, the Co-founder and CEO of Honasa Consumer, said that the company will continue to double down on offline as a channel.
Currently, skincare and haircare are the largest categories for Honasa Consumer, while color cosmetics is the fastest-growing category. The company is also present in baby care and body care. In terms of sales contribution, Alagh said that more than 50% of the company’s online D2C sales come from smaller and aspirational markets in tier II cities and beyond. This gives the company confidence that when it takes its products offline, it will also get good traction in these markets.
Honasa Consumer delivers its products to over 18,000 pincodes in India. Alagh believes that online will continue to grow much faster than offline for the overall FMCG industry in beauty and personal care products. Online penetration in India is only 7-8%, compared to 45% in the US and 40% in China. However, 90% of transactions and category buying still happen offline.
Alagh believes that for any player who wants to gain share from established players, it is important to build and gain share in the offline channel. Currently, Alagh and his wife Ghazal Alagh together own about 37% of Honasa Consumer. When asked about the company’s debt, Alagh said that Honasa Consumer has zero debt and is a profitable cash-generating company with more than Rs 400 crore of cash.
Alagh described his journey from starting a startup to filing for an IPO as a “personal journey.” The company was started to provide safe and toxin-free products for babies in India because he and his wife could not find the right products for their son. Alagh said that he has closely seen how consumers are evolving and how many brands and companies have not evolved at the same pace as consumers. Brands like Honasa Consumer that listen to consumers and provide them with the right propositions have received a lot of love from consumers.