Mamaearth: Another loss-making D-street debutant

Mamaearth's parent, Honasa Consumer, was successfully listed at a premium of around 2 per cent on the NSE (at Rs 330) on Tuesday. On the BSE, Mamaearth share was listed at par with the issue price of Rs 324.

Not the first time

This is not the first time a new-age online platform company has listed at a premium. Even Zomato and FSN E-Commerce (Nykaa) were listed two years ago at a premium of 53 and 79 per cent, respectively. However, what matters is whether they were able to sustain this premium.

They made losses and had inconsistent financials, because of which the share price started falling after a few days. In the next one year since listing, both companies fell by 57 and 47 per cent, respectively.

Only time will tell if Mamaearth will also face the same fate, given their poor financials. The company had negative equity two years ago! You can read our complete analysis of the company here.

A brief history

At the beginning of 2023 the company was planning to launch its Rs 2,400 crore IPO at a valuation of Rs 24,000 crore. It hoped to raise Rs 400 crore as fresh issue and the rest through an offer for sale (OFS) of about 4.7 crore shares. It reported a PAT of Rs 16 crore and a revenue of Rs 943 crore in FY22. Imagine a P/E of 1500 times!

However, due to multiple issues including market criticism, they delayed their IPO and reduced the valuations to around Rs 10,500 crore. Since the company reported a loss, it did not have a P/E at the time of analysis.

Given the poor fundamentals of the company, one may ask whether one should buy the stock just because the company was listed at a premium and because it reduced its valuation by half.

Conclusion

Although the company has been able to hold off its issue price on the listing day, investors are advised to analyse it thoroughly. After all, just being in a popular space with a popular brand doesn't make a business a good investment.

Also read: Lessons from IPOs