Honasa Consumer IPO GMP (Grey Market Premium)

Honasa Consumer IPO opens on 31st October 2023 and closes for subscription on 02nd November 2023. The stock of Honasa Consumer Ltd has a face value of ₹10 per share and the IPO will be a book built issue with the IPO price band set in the range of ₹308 to ₹324. The IPO will entail a fresh issue of shares and an offer for sale (OFS) by the promoters and the early investors in the company. The fresh issue portion of Honasa Consumer Ltd comprises the issue of 1,12,65,432 shares (112.65 lakh shares approximately), which at the upper price band of ₹324 per share translates into fresh issue size of ₹365 crore. The offer for sale (OFS) component of the Honasa Consumer Ltd IPO comprises the sale of 4,12,48,162 shares (412.48 lakh shares approximately), which at the upper price band of ₹324 per share will entail an offer for sale (OFS) size of ₹1,336.44 crore. The OFS selling will be don by 2 promoter shareholders viz. Varun Alagh and Ghazal Alagh. The non- promoter selling investor shareholders in the OFS include Fireside Ventures, Sofina, Stellaris, Kunal Bahl, Rishabh Mariwala, Rohit Bansal, and Shilpa Shetty Kundra.

Therefore, the overall Honasa Products IPO will comprise of the issue and sale of 5,25,13,594 shares (525.14 crore shares approximately), which at the upper price band of ₹324 per share will translate into total IPO issue size of ₹1,701.44 crore. Honasa Products (which owns marquee brands like Mamaearth, Aqualogica, Derma and BBLUNT) was promoted by former FMCG to honcho, Varun Alagh, and his wife Ghazal Alagh (of Shark Tank fame). Fresh funds will be used for brand building, investing in EBOs and invest in subsidiaries. The issue will be lead managed by Kotak Mahindra Capital, Citigroup Global Markets, JM Financial and JP Morgan India. KFIN Technologies Ltd will be the registrar to the issue.

About (Mamaearth IPO) Honasa Consumer IPO GMP

The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of Honasa Consumer Ltd, we already have GMP data for the last 3 days, which should give a reasonable picture of the likely listing.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, especially the liquidity conditions in the market. Secondly, the extent of subscription for the IPO has a deep impact on the GMP as it is indicative of investor interest in the stock. GMP can also technically be in negative, which means the stock would list at a discount to the issue price.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

How has the GMP panned out in last few days

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing. Here is a quick GMP summary for Honasa Consumer IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹47, but has since tapered to ₹24 per share for which GMP data is available. The IPO price of Honasa was only announced on the morning of 26ths October, so the sudden drop in the GMP could be due to that. Of course, we have to await for the actual subscription numbers to flow in after the issue opens for subscription on 31st October 2023 and also watch the progress, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, Honasa Consumer Ltd has shown good traction in the grey market.

If you consider the upper end of band price of the IPO of Honasa Consumer Ltd at ₹324, then the likely listing price is being signalled at around ₹356 per share as per the GMP indicator on 26th October 2023. This is dynamic and keeps changing. One data point to track will be the subscription update on the stock as that would chart the GMP course.

The GMP of ₹32 on the upper end of the book built IPO price of ₹324 indicates a listing premium of a moderately healthy 9.88% for Honasa Consumer Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹356 per share, when Honasa Consumer Ltd lists on 10th November 2023. Of course, these are purely approximations, so you must keep a margin of safety. One needs to observe the trend of GMP closely as that gives the best hints on listing status. Look at the time series trend instead of just the GMP absolute numbers.

How to apply for the Honasa Consumer IPO (Mamaearth IPO)

Investors can apply for the Honasa Consumer IPO in minimum lot sizes. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Honasa Consumer Ltd, the minimum lot size is 46 shares with upper band indicative value of ₹14,904. In short, IPO investors have to apply in lots that are in multiples of 46 shares only. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Honasa Consumer Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Quota allocation across IPO investor categories

As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while 10% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of Honasa Consumer Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

It may be noted here that this allocation will be done on the quantity net of employee quota. Employees will have a discount of ₹30 to the IPO price. The anchor portion, will be carved out of the QIB portion.

The issue opens for subscription on 31st October 2023 and closes for subscription on 02nd November 2023 (both days inclusive). The basis of allotment will be finalized on 07th November 2023 and the refunds will be initiated on 08th November 2023. In addition, the demat credits are expected to happen on 09th November 2023 and the stock is scheduled to also list on 10th November 2023 on the NSE and the BSE.