Mamaearth Shares Rally 6% After Fireside Ventures Sells Partial Stake Via Block Deal

Last Updated: December 05, 2023, 12:41 IST

Shares of Honasa Consumer Ltd, the parent company of beauty and skincare brand Mamaearth Ltd, jumped nearly 6% to the day’s high of Rs 406, following a block deal in the counter where Fireside Ventures Invt Fund I sold a 1.9% stake worth Rs 230 crore.

The floor price of the offers is expected to be at Rs 368.70 – Rs 384.10, a discount of up to 4% over the Monday closing price of Rs 384.10, CNBC-TV18 reported.

Private equity firm Fireside Investments was looking to sell a 1.9% stake in Honasa Consumer Ltd, sources told CNBC-TV18 on Monday.

The company’s shares went public on November 7, listing at ₹324. However, the stock has surged 40% from its post-listing low of ₹275.

The Honasa Consumer stock has seen a stellar upmove since the company announced its quarterly earnings. But fundamentals are not the only reason that has driven the stock rally.

Besides posting strong results in the September quarter and global brokerage firm Jefferies projecting potential upside of 36% on the counter, lack of available liquidity is another reason behind the surge in stock price.

Honasa Consumer has 32.17 crore shares outstanding, according to available data.

Out of these outstanding shares, 1.18 crore shares each are locked for sale until December this year and January next year. Another 21 crore shares are locked for sale until as late as May 2025.

Based on this data, only 7.56 crore shares or 23.5% of the company’s outstanding equity is currently available to trade.

For the second-quarter, the company recorded a 21% growth in topline to ₹496 crore, while EBITDA or Earnings before Interest, Tax, Depreciation and Amortisation rose by 53.5% to ₹40.3 crore. The company’s EBITDA margin also grew by 170 basis points to 8.1%.

Underlying volume growth for the quarter stood at 27%.

The recovery came after Jefferies initiated a “conviction” buy on the Honasa Consumer stock, the first after the stock listed. Jefferies ascribed a price target of ₹520 on the counter, which was a potential upside of 36% on the stock from its levels today.

Jefferies expects Honasa to report industry-leading growth of 27% over the next three years. The brokerage is also expecting double-digit margins by financial year 2026, led by an optimisation in marketing spends and scale benefits.

Jefferies expects the company’s BPC business to grow in double-digits with steady gains for its online channel. It also called Honasa’s prioritising growth over profitability as the “correct strategy.”

Founded by husband-wife duo Ghazal Alagh and Varun Alagh, Mamaearth is the fastest-growing beauty and personal care brand. Driven by innovation and using the best of science and nature, the brand caters to the personal care needs of young, aspirational, and increasingly conscious Indian consumers. In a short span of six years, Mamaearth has created a product portfolio of toxin-free and safe beauty products inspired by nature and traditional Indian DIY recipes.

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By jaghit

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