Honasa Consumer Aims to Capitalize on Booming Beauty and Personal Care Market

• ByStartupStory     |    November 3, 2023

Honasa Consumer, the parent company of popular beauty and personal care brands like Mamaearth, BBlunt, and Dr. Sheth’s, is poised to seize the opportunity in the thriving Indian market. Reports from brokerage firms suggest that Honasa Consumer is well-positioned for success. The company is gearing up to raise Rs 1,701 crore through its Initial Public Offering (IPO), comprising a fresh issuance of shares valued at Rs 365 crore and an offer for sale of 4.13 crore shares. The recently concluded three-day book building for the IPO, ending on November 2, received bids 7.61 times over.

Founded in 2016 by Varun and Ghazal Alagh, Honasa Consumer is setting its sights on the rapidly growing beauty and personal care (BPC) market in India, which is currently valued at $20 billion. It is expected to experience annual growth of 11%, reaching approximately $33 billion by 2027.

HDFC Securities points out that while the Indian BPC market is the sixth largest globally, it remains significantly underpenetrated. For example, in 2022, per capita BPC spending in China was around three times that of India, and even compared to smaller economies like Indonesia, India’s per capita BPC spending is lower, indicating substantial growth potential.

Emkay Research identifies a new emerging class of consumers who are more conscious of such products and are willing to pay a premium. Furthermore, the expanding middle class is contributing to the market’s growth. Emkay Research predicts that pure-play BPC brands will experience double the growth in the segment, primarily due to agility, specificity, innovation, a new-age focus, and an online orientation. Honasa Consumer’s digital-first approach, entry into offline retail, and outsourcing of manufacturing offer numerous advantages.

Axis Capital reports that Honasa has achieved an impressive revenue growth of 80.14% between financial years 2021 and 2023, from Rs 459.99 crore in FY21 to Rs 1,492.75 crore in FY23. In comparison, the median revenue Compound Annual Growth Rate (CAGR) of other BPC companies for the same period, where data is available, was 28%.

HDFC Securities highlights that the online BPC market in India is still underpenetrated compared to countries like the United States and China, where online BPC penetration stands at 20-25% and 35-40%, respectively. In India, the online BPC penetration is approximately 16%, indicating further room for growth in the online BPC sector.

The brokerage firm further notes that Honasa Consumer’s gross margins are in the range of 70-75%, and the company is actively working towards profitability as it scales. While it currently operates at a loss, it reported a revenue of Rs 1,493 crore for FY23. Given its expanding retention rates, the need for customer acquisition costs is expected to decrease, leading to cost savings in marketing and freight expenses.

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In conclusion, Honasa Consumer’s house of brands, combined with its ability to directly connect with consumers and adapt to their evolving needs, positions it favorably for sustained growth and profitability, outperforming its peers in the FMCG sector.

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