Honasa Consumer

Pre-IPO presentation

Sep 2023

Analyst Gunjan Jain

Harit Kapoor Gunjan.jain@investec.co.in
Harit.kapoor@investec.co.in
+91 22 6849 7493

This presentation and any attachment is provided to you subject to the disclaimer and disclosures set out at the end of this document,
and this document is incomplete without such disclaimer and disclosures.
 Contents
Honasa: About the issue 3

India BPC – A strong history of growth 4

Indian BPC market segmentation 6

Entry of multiple new BPC centric players 7

Honasa– The key factors that drove scale and size 9

Diversification across category, channel, brands 12

Attempting a house of brands strategy 14

Comparing Honasa with new age BPC players 15

Comparison with traditional FMCG players in the BPC space 17

Evolution of traditional FMCG players in the BPC space 18

Management Team 20

Valuation Matrix for BPC 21

Questions for Management 22

Honasa Consumer – Summary of Observations 23

Honasa Summary Financials 24

2 Confidential | Investec
 Honasa: About the issue
• The IPO of Honasa includes fresh issue of Rs 4bn and offer for sale of Promoters, SCI and Fireside are key shareholders
46.8mn shares. Shareholders %
Varun Alagh 34.3%
SCI VI 19.5%
• The selling shareholders include Promoters – Varun and Ghazal Alagh – Fireside Ventures 10.4%
and a partial exit by investors – Sofina, Stellaris, Fireside Ventures and Stellaris 9.5%
Evolvence India. Sofina 9.5%
SCI III 4.5%
Ghazal Alagh 3.2%
• The primary use of fresh issue proceeds will be for advertising and Rishabh Mariwala 2.9%
balance will be for new EBOs and salons under BBlunt. Evolvence India 1.4%
Kunal Bahl 0.8%
• Media reports suggest the company is looking for Rs120-130bn Rohit Bansal 0.8%
valuation. Shilpa Shetty Kundra 0.5%
Other promoter group 0.1%

45% of fresh issue will be used for advertisement expenses Sofina, Stellaris, Fireside are top selling shareholders
Shares held (post
Objects of Issue INR mn Shares offered for % of shares
Shareholder NCCCPS
sale offered
conversion)
Advertisement expenses 1,860 Promoters
Varun Alagh 3,186,300 106,737,650 3.0%
Ghazal Alagh 100,000 10,065,200 1.0%
To set up new EBOs 342 Investors selling shareholders
Sofina 19,133,948 29,541,000 64.8%
Stellaris 12,755,965 29,553,900 43.2%
Fireside ventures 7,972,478 32,327,400 24.7%
To invest in Bblunt for new salons 275
Evolvence India 1,083,600 4,308,600 25.1%
Other selling shareholders
General corporate purposes & unidentified inorganic Kunal Bahl 777,672 23,86,500 32.6%
To be finalised later Rohit Bansal 777,672 23,86,500 32.6%
acquisition
Shilpa Shetty 554,700 16,23,635 34.2%
Rishabh Mariwala 477,300 9,120,300 5.2%
Confidential | Investec

Source: DRHP, Company, Investec securities research. 3

India BPC – A strong history of growth
$17bn India BPC sector is expected to grow at 12% CAGR Low per capita BPC spend of $12 was the main growth driver in 2021

67% of unorganised will grow slower than 33% of organised Face & Makeup are fastest growing categories
3%
27% Wellness, 6%
Online, 14% Fragrance, 6% 10%
Organised Offline, Makeup, 9% 12%
18% 19% Oral care, 13% 8%
Face care, 15% 12%

Unorganised Offline, 4% Body care, 23% 9%

67%

Hair care, 28% 9%

Channel Split 2021 Channel CAGR (2021-2026) Category mix (2021) Category CAGR (2021-2026)

Unorganised offline is largely general trade; Organised offline stands for modern trade, multi-brand outlets, exclusive brand outlets;
Online includes online marketplace & DTC websites
Confidential | Investec

Source: DRHP, Company, Investec securities research. 4

Indian BPC – Macro drivers in place
57% of households will be part of Rich or Middle Class in FY31E GenZ & Millennials were 55% of India’s population in 2021

5%
Household distribution %

15%
31% 434mn

India Population mix

38%

52%

47% 55% 770mn

30%

3% 10%
FY21 FY31P 15% 210mn

Rich Middle Class Aspirers Destitutes 0-8 years GenZ & Millenials 40+ years

High growth in BPC is coming from non-metros (68% of market) Non Mass BPC market is growing fast (45% of the market)

7% 16%

18%
47% 38%
17%

21%
17%

55%
7%
32% 7%

BPC market mix (2021) CAGR (2016-19) BPC market mix (2021) CAGR (2021-26)

Metro Tier 1 Tier 2+ Mass Masstige Premium

Confidential | Investec Masstige is >= 10-15% priced higher than Mass, Premium is >= 20% priced higher than Masstige
Source: DRHP, Investec securities research 5
Indian BPC market segmentation
Make-up and Fragrance provides a good opportunity for new players given fast growing & less consolidated market

Market size (Rs Total share of top

New players CAGR (2021-26) Top 3 players Key new entrants
bn) 3 players

Hair Care 381 9% HUL - 17% Marico - 16% Loreal - 8% 41% Honasa, WOW Skinscience

Bath & Body 313 9% HUL - 36% Wipro - 11% GCPL & RB -10% 57% Honasa, Plum, Mcaffeine, SkinKraft

Face Care 204 12% HUL - 34% Himalaya - 8% Loreal - 4% 46% Minimalist, Honasa, MCaffeine, Plum, Dot & Key (Nykaa)

Oral Care 177 8% Colgate - 43% HUL 17% Dabur 13% 73% Mamearth, Perfora

Makeup 122 12% HUL - 16% Loreal - 7% Estee Lauder - 4% 27% Sugar cosmetics, Kay Beauty (Nykaa), Nykaa Cosmetics

Fragrance 82 10% Coty - 14% Titan - 6% P&G - 6% 26% Plum, Nykaa Wanderlust

Wellness 82 3% Herballife - 11% GSK - 7% Dabur - 7% 25% HealthKart, Oziva (HUL)

1,360 12%

Source: DRHP, Investec securities research

6 Confidential | Investec
 Entry of multiple new BPC centric players
Many new BPC companies have crossed a good scale of Rs 1bn sales

FY22 Sales
New BPC Players Categories
(Rs mn)

Honasa 9,435 Face care, Hair care, Baby care

WOW Skinscience 3,404 Face care, Hair care
HealthKart* 3,100 Wellness
Forest Essentials 2,985 Face care, Hair care
Sugar Cosmetics 2,200 Makeup
Plum 1,845 Face care, Bath & Body, Fragrance
Incnut (SkinKraft & Vedix) 1,475 Hair & Face care
Mcaffeine 1,352 Face care, Bath & Body
Kama Ayurveda 1,350 Hair & Face care
Oziva (HUL) 1,200 Wellness
Minimalist 1,081 Face care, Hair care, Bath & Body
Beardo 949 Male grooming
The Man Company 736 Male grooming
Moms Co 585 Face care, Hair care, Bath & Body, Baby care
Dot & Key 309 Face care
*FY21 numbers

RedSeer suggests 35 National BPC companies with Rs 1 bn revenues in FY21 and 8+ have grown at 30%+ CAGR over FY19-21.

7 Confidential | Investec

Source: DRHP, Investec securities research

 BPC industry – Attractive for new entrants

BPC industry has high gross margin, high shelf life, high scope of premiumisation and high online presence - very good for new players

Parameters BPC Food Home

Size of the market $17 bn $470bn $7bn

2021-26 CAGR 12% 9% 8%

Online penetration 14% 3% 4%

AOV Rs 250+ Rs 100+ Rs 150+

Gross margins 60%+ 40%+ 50%+

Scope of Premiumisation High Low Medium

Shelf life High Low High

Manufacturing Outsourced Inhouse Outsourced

Transportation cost Low High Low

Advertising spends High Low Medium

Brand loyalty Medium High Low

Source: DRHP, Investec securities research

8 Confidential | Investec
Honasa– The key factors that drove scale and size

Positives Details
BPC industry – positive for new entrants A category with high gross margins and a strong digital salience makes it more attractive for new pure play companies

Quickly developed scale and with solid metrics A first mover advantage and a quick scale up to Rs1bn+ in just 3 years and just under Rs10bn in five years (full years of
operation)

Diversified from baby care to broader personal care Used the baby care playbook to broader BPC and realized much faster scale; transition began in CY18

Strong brand proposition Proposition was based on safe good for you products;

Diversified into Offline 35-40% of revenues now are offline; GT still a small component with bulk of the offline coming from MT and CSD

Initial success of House of brands strategy Now have a portfolio of 6 brands with a mix of organic and inorganic though Mama Earth remains the dominant brand in
terms of mix

Operationally profitable EBITDA margins were positive in 1HFY23 despite sharply rising personnel costs; future trajectory likely to be a function
of scale and advertising mix change in our view. New age competitors are largely still loss making.

Source: DRHP, Investec securities research

9 Confidential | Investec
Company has quickly developed scale

Started in FY17, Honasa achieved Rs1bn in 3 yrs &~Rs10bn

Year Key Milestones
in 5 yrs

9,435 2016 Honasa was started

2017 Its Mosquito repellent becomes successful

Honasa's revenue (Rs mn)

2017 Fireside & Titan company invest

4,600
2018 Stellaris & Shilpa Shetty invests

2018 Diversifies away from baby care products into Personal care products
1,098
53 168
2019 Onion & Ubtan range becomes successful
FY18 FY19 FY20 FY21 FY22
2020 Sequoia invests

2020 Launched ‘The Derma Co.’ brand

2021 Sofina invests

2021 Launched 'Acqualogica' skincare brand & 'Ayuga' ayurvedic products range

2021 Launched its first EBO

2021 Acquired Momspresso - a content platform

2022 Acquired BBlunt - professional hair care range and salons

Source: DRHP, Investec securities research

2022 Acquired Dr Sheth's skincare brand

10 Confidential | Investec
Brand proposition has worked this far

Honasa’s brand proposition is built on the following pillars:

1) Power of nature: The key ingredients used in its product ranges are inspired from nature and
traditional Indian DIY recipes for BPC products. Some of its best-selling ingredient ranges include onion,
ubtan, vitamin C and tea tree

2) Toxin-free beauty products: Chemicals harmful for humans or environment such as (i) parabens, (ii)
phthalates, (iii) sulphates (SLS/SLES), (iv) mineral oil, (v) formaldehydes, (vi) triclosan and (vii) benzene
are not used in its formulations. Its products are tested by expert dermatologists

3) Cruelty free: The brand is PETA certified and is committed to being cruelty free with no animal testing
at any stage of production or marketing.

4) Goodness inside:
Plant Goodness: We plant trees on behalf of orders placed on our D2C channel. As of Oct 31, 2022, it
has planted more than 300,000 trees since inception. Each tree is geo-tagged, enabling transparency
and visibility to our consumers.

Plastic Positive: It has recycled 3,421 metric tonnes of plastic in FY21 and FY22, which is more than
the plastic used in products procured by it from contract manufacturers during the same period.

Redefining Beauty: It defines beauty as ‘doing good’ rather than ‘looking good’. As a representation of
this belief, it created a marketing platform, ‘Beautiful Indians’, that celebrated goodness by recognizing
individuals who demonstrated acts of goodness across social or environmental causes.

Source: DRHP, Investec securities research

11 Confidential | Investec
Diversification across category, channel, brands

Started in FY17 with baby care range, today baby care is only
Using the core Mamearth playbook for new brands
One segment in the overall mix

Months taken to reach Rs 90mn in monthly revenue

List of categories

Face Care - Face wash, face mask, face gel, face moisturizer, face serum, face cream, The Derma Co 24
face toner, face scrub
Hair Care - Hair oil, hair mask, shampoo, conditioner, hair serum

Skin Care - Body lotion, body wash, body scrub, hand cream, body soap Mamaearth 34

Makeup - Lipstick, foundation, concealer, compact, kajal, lip balm

Months taken to reach Rs 25mn in monthly revenue
Baby Care - Baby shampoo, baby oral care, baby oil, baby body lotion etc

Fragrances
Aqualogica 11

Scaled up offline from 9% of sales in FY20 to 35% on Sep-22 The Derma

14
Co

Dr. Sheth's monthly revenue scaled up 3.6x run rate post acquisition
(acquired in April '22)
3.6 R

April '22 Sep '22

12 Confidential | Investec

Source: DRHP, Investec securities research

Honasa’s Strategy

Expand distribution and brand awareness

The company intends to continue to invest in innovative brand building and performance marketing initiatives to drive awareness and generate trials for its brands. Further, given that the
offline channel is 85% of the BPC products market in India (in 2021; source Redseer) , the company plans to strategically leverage the offline channel to drive household penetration in its
mainstream BPC categories such as shampoo, hair oil and face washes. The company plans to increase its offline store footprint and increase the sales from its existing 112,868 outlets
(as of September 2022).

Incubate or acquire new engines of growth

The company plans to launch new brands and continue to drive product innovations across existing brands. Within this, the company intends to continuously leverage its House of Brands
Company strategy

architecture and brand launch playbooks to derive both revenue and cost synergies for the new brands. On innovation, the company intends to a) launch innovative products in existing
categories b) enter new BPC categories c) identify white spaces and build new age brands.
From a distribution standpoint, the company plans to a) open new Mamaearth EBOs across a mix of mall stores and high-street outlets in India b) expand their salon footprint (BBlunt) and
build on positive synergies for the products business.
On new markets, the company plans to opportunistically expand its presence in identified priority markets such as the United Arab Emirates, Nepal, and Bangladesh, both organically and
through strategic acquisitions.

Strengthen business efficiency drivers

The company intends to continue growing the share of offline channel for its Mamaearth brand (~35% as of Sep 2022 across all brands). This will likely improve the margin profile as well
given the channel is more profitable.
As its business scales, the company plans to derive benefits of economies of scale across all aspects of the business model, including procurement and manufacturing, supply chain and
distribution, advertising and promotional expenses, and operating expenses.
The company intends to continue to invest in our technology and data capabilities to drive business efficiencies, stay connected with our consumers and strengthen cross-brand, cross-
functional synergies.

Confidential | Investec

Source: DRHP, Investec securities research 13

 Attempting a house of brands strategy
Global players in BPC like Loreal, Estee Lauder etc have built a house of brands strategy with the focus being sustained on BPC. Honasa is on a similar path as it tried to
augment the core Mama Earth brand with a portfolio of brands to capture BPC sub segments and drive growth
House of Brands Description

• Flagship brand established in 2016, offering toxin-free beauty products across baby care, hair care, face care, body care, color cosmetics and fragrances
made with natural ingredients
• Launched in 2020, The Derma Co comprises science backed products for hair and skin powered with active ingredients
• The brand offers a range of products such as serums, cleansers, acne patches etc, along with an AI enabled experience to provide real time skin
assessment analysis to consumers
• As per the management’s statements (Redseer event), the brand crossed a Rs1bn revenue and is the second largest brand in the company’s portfolio.
• A specialised skincare brand, launched in November 2021, which provides hydrating skincare designed for Indian skin types
• Aqualogica’s portfolio includes face wash, face scrubs, sheet mask, gel moisterizer etc. As per the management’s statements (Redseer event), the brand is
operating at a Rs125m monthly revenue run-rate currently.

• Bblunt is a premium haircare brand, acquired in March 2022 from Godrej Consumer Products Limited (GCPL) for Rs 845mn
• It offers professional haircare and styling products such as shampoos & conditioners, hair serums, hair color, heat protection mist, and hair sprays

• Dr Sheth’s offers bio-actives based skincare developed by three generations of skin specialists. It covers the whole spectrum of skincare from face washes
to chemical peels.
• Honasa took a majority stake in FY2023, with the brand focus on naturally inspired and scientifically validated products
• Ayurvedic Skincare brand curating products in easy-to-use, modern formats for Indian Millennials
• Ayuga products include night gel, face serum, sunscreen, shampoo, conditioner and hair serum under the Kumkumadi, Chandanam and Bhringkesham
range
• Launched in 2016 and acquired by them in December 2021, Momspresso is a female oriented content platform under their subsidiary Just 4Kids Service
Private Limited
• Its key verticals include -
➢ UGC Content Platform – Providing women with relevant content on womanhood and motherhood
➢ Content Development Factory – Works as a third-party agency to develop content across textual and video formats
➢ MyMoney – Using MyMoney, users can work as micro-influencers for brands by driving awareness of the same on their social media platforms
As per media reports, the company has decided to close this business.

Source: DRHP, Investec securities research

14 Confidential | Investec
Comparing Honasa with new age BPC players

Revenue of new age BPC companies in FY22 EBITDA margin of new age BPC companies

10,000 9,435 Companies EBITDA margins (FY22)

8,000 Zed Lifestyle (Beardo) -0.5%

6,000
Vellvette Lifestyle (Sugar Cosmetics) -30.9%
Rs mn

4,909

4,000 3,404
Body Cupid (WOW Skin Science) -34.0%
2,211
2,000
736 949 Helios Lifestyle (The Man Company) -40.6%

-
Helios Lifetsyle Zed Lifestyle Vellvette Lifestyle Body Cupid Bright Lifecare Honasa Bright Lifecare (HealthKart) -66.1%
(The Man (Beardo) (Sugar (WOW Skin (HealthKart)
Company) Cosmetics) Science)
Honasa 1.2%

A look at some of the D2C companies in BPC suggests, as per our analysis, suggests that Honasa has created scale ahead of competition. Further, it
requires scale to achieve profitability in a business where companies are spending significantly higher proportion of their sales as advertising spends and
the channel (digital/ecommerce) is more expensive in terms of trade margins to third party aggregators. Given that, Honasa’s scale and increasing offline
mix is likely the reason for the positive EBITDA margin vs new age companies.

15 Confidential | Investec

Source: DRHP, Investec securities research

Honasa Consumer – So what are the concerns

Concerns Details

Advertising spends remain high at As per 1HFY23, advertising spends are at 38% of sales. Our industry understanding suggests
scale this is more so due to the online presence being higher than offline.

Capital Allocation – not a historical Thus far capital allocation has been measured with no investment in capex and small
concern acquisitions resulting in a net cash balance sheet after capital raise. Acquisition remains the key
monitorable in terms of capital allocation

The Shift to offline, especially GT With 35% of business now offline, our channel checks suggest a small share of general trade in
the same. Performance in general trade in our view and increasing offline share will be the key
determinant of growth going forward

The legacy FMCG player catching We believe incumbent FMCG companies have improved their offerings and will likely be of a
up greater competitive threat vs earlier to the new age BPC companies going forward

Source: DRHP, Investec securities research

16 Confidential | Investec
 Comparison with traditional FMCG players in the BPC space

Gross Margin of traditional FMCG companies in FY22 Ad spends of the traditional FMCG companies as a % of sales in FY22

75.0% 70.0% 50.00%

66.3%
41.50%
60.0% 40.00%
50.5% 50.9%
48.2%
42.9% 30.00%
45.0%

30.0% 20.00% 16.40%

8% 8.40% 9.20%
15.0% 10.00% 7.10%

0.0% 0.00%
Marico Dabur GCPL HUL Emami Honasa Dabur GCPL Marico HUL Emami Honasa

EBITDA Margin of traditional FMCG companies in FY22 PAN India presence of Honasa

40.0%
Domestic volume split across regions as of FY22
29.9%
30.0% North 31.72%
24.4%
19.5% 20.7%
20.0% 17.7%
South 24.35%

10.0% East 17.15%

1.2%
0.0% West 26.78%
Honasa Marico GCPL Dabur HUL Emami

17 Confidential | Investec

Source: DRHP, Investec securities research

 Evolution of traditional FMCG players in the BPC space

Company Description

HUL • The largest BPC player in India, HUL, has over the last 3-4 years looked to fill portfolio gaps, get more agile and have a dedicated focus on premium beauty and health and
wellbeing.

• Notable developments are

➢ Setting up multiple nano factories for small batch production
➢ Reducing speed to market for premium launches
➢ Having 5 brands (Love Beauty Planet, Simple, AcneSquad, Find Your Happy Place, Baby Dove) now in its premium beauty business unit
➢ Acquisition of VWash from Glenmark Pharmaceuticals Limited
➢ Two acquisitions in health and well being in FY23 (OZiva and Wellbeing Nutrition)
➢ Premiumizing existing beauty and personal care brands

Marico • Marico over last few years has been among the more acquisitive of the FMCG companies in BPC

• Notable developments are

➢ Acquisition of Beardo and scale up now to Rs1bn+ revenue
➢ Acquisition of Just Herbs and scale up now to ~Rs600m in FY23
➢ Organic launches such as Coco Soul, Pure Sense, Oxy-Fusion
➢ Digital first brands (including Beardo, Coco Soul, Just Herbs and Pure Sense) are expected to achieve a Rs4bn run rate on an exit FY24 basis
➢ Acquired 58% stake in Satiya Nutraceuticals (Plix)

Emami • Emami has also made some BPC acquisitions. Notable developments over the years are
➢ Acquisition of Helios Lifestyle (The Man Company)
➢ Acquisition of stake in Brillare Science
➢ Launch of premium variants of existing brands

Dabur • The company has not made acquisitions in the BPC space but has focused on variant launches across its personal care categories of hair oils, skin care, bleach, shampoos,
baby massage oils etc with some of them being digital first
GCPL • Acquired the Raymond FMCG business in FY24 with key categories being sexual wellness, deodorants and perfumes as key categories

Source: DRHP, Investec securities research

18 Confidential | Investec
 About the Board
Board Of Directors
Name Designation Past Experience

He holds a bachelor’s degree of engineering (electrical) from the University of Delhi, Delhi and a post-graduate diploma in
Varun Alagh Chairman, WTD, CEO business management from XLRI, Jamshedpur. Previously, he has worked with corporations such as HUL, Diageo India and
Coca-Cola India.

WTD, Chief Innovation She is one of the Promoters of our Company. She holds a bachelor’s degree of computer applications from Panjab University,
Ghazal Alagh
officer Chandigarh and a certification in software engineering from the academic council of the NIIT Academy, New Delhi.

A nominee of SCI on our Board. He holds a Btech in mechanical engineering from the IIT, Delhi and a master’s degree in
business administration from Harvard University, Commonwealth of Massachusetts. Previously, he has worked with the BCG
Ishaan Mittal Non Executive Director
for a year and is working with Sequoia Capital India for a period of over eight years where he is currently working as “Managing
Director”.

He holds a bachelor’s degree in arts and a bachelor’s degree of science from the Lafayette College, Pennsylvania. Further, he
Vivek Gambhir Independent Director holds a master’s degree in business administration from Harvard Business School, Commonwealth of Massachusetts. He has
worked with Bain for 11 years where he was partner and with GCPL for 11 years as WTD.

He holds Bcom from University of Madras and is a Chartered Accountant and Cost Accountant. He was CFO of Titan company
Subramaniam for a decade. He has worked in the telecom industry for over 11 years as well, as the CFO for BPL Mobile group and CEO for
Independent Director
Somasundaram BPL Mobile operations in Mumbai and CFO of the telecom vertical in Essar group. He has also worked earlier in his career
with I.T.C Limited, V.S.T Industries Limited in India and Mannai Corporation Limited, Qatar.

She holds masters degree of technology in mathematics and computing from the IIT, Delhi. She worked with Microsoft
Corporation. She has also worked with Facebook for a period of over 5 yrs where she was last associated as "Partner
Namita Gupta Independent Director
engineer". Further, she is also serving as an independent director on Zomato since Mar 2021 and is founder and currently on
board of directors of Airveda Technologies.

Source: DRHP, Investec securities research

Confidential | Investec

19
 Management Team
Name Designation Date of Joining Education & Past Experience
He holds a bachelor’s degree of engineering (electrical) from the University of Delhi, Delhi and a post-graduate diploma in
Chairman, WTD,
Varun Alagh Sep-16 business management from XLRI, Jamshedpur. Previously, he has worked with corporations such as HUL, Diageo India
CEO
and Coca-Cola India.
She is one of the Promoters of our Company. She holds a bachelor’s degree of computer applications from Panjab
Ghazal Alagh WTD and CIO Sep-16 University, Chandigarh and a certification in software engineering from the academic council of the NIIT Academy, New
Delhi.

He holds a bachelor’s degree of commerce from Panjab University, Chandigarh and a post-graduation diploma in
Raman Preet Sohi CFO Apr-20 management in international business from Symbiosis Institute of Management Studies, Pune. Previously, he worked with
Drums Food International (Epigamia) as the CFO for over a year.

He holds a Bcom from Bangalore University and a bachelor’s degree of law from Maneklal Nanavati Law College, Gujrat
Company University. He was also admitted as an associate member of the ICSI. Previously, he has worked with Zydus Wellness, as
Dhanraj Dagar May-22
Secretary CS and compliance officer. He has also worked with Chirpal Industries , Narmada Bio-Chem, Nirma as legal manager and
DS-Max Properties.

She holds a bachelor’s degree of arts (honours course) from University of Delhi, Delhi and PGDM from Management
Chief Marketing Development Institute, Gurgaon. Previously, she has worked with Hewitt Associates India for a period of over a year,
Anuja Mishra Mar-22
Officer Nestle India for a period of over a year and Pepsico India for 10 years and was last designated as “associate director –
brand marketing flavours”.

He holds a master’s degree of technology in mathematics and computing (5-year integrated programme) from IIT, Delhi.
Chief Product &
Jayant Chauhan Nov-20 Previously, he has worked with Policybazaar Group for a period of over a year where he was last designated as “Director –
Technology Officer
Technology”.

Chief Business He holds a post-graduate diploma in management from Indian Institute of Management, Lucknow. Previously, he has
Zairus Master Aug-21
Officer worked with Bharti Airtel Limited as “senior vice president – marketing”.
Source: DRHP, Investec securities research

Confidential | Investec

20
 Valuation matrix for Indian listed BPC for Honasa

Price Mcap PE EV/Sales EV/EBITDA

Companies

(Rs) (Rs mn) FY24e FY25e FY26e FY24e FY25e FY26e FY24e FY25e FY26e

HUL 2,487 5,844,373 54.4 47.7 42.8 9.1 8.4 7.7 38.6 34.0 30.7

Marico 582 752,485 49.5 43.0 37.6 7.3 6.6 5.9 35.5 31.0 27.3

Emami 550 239,966 28.6 25.9 23.6 6.5 6.0 5.5 24.6 22.5 20.6

Dabur 566 1,003,237 50.6 44.0 38.6 7.8 7.1 6.4 40.4 35.5 31.7

GCPL 993 1,016,059 50.9 42.0 34.5 6.7 6.0 5.5 33.7 28.4 24.4

FSN Ecommerce(1) 149 425,645 452.2 170.7 86.6 6.7 5.3 4.2 106.9 66.0 42.3

Average 114.4 62.2 43.9 7.4 6.5 5.9 46.6 36.2 29.5

Prices as on 18th September, Source: Investec Securities Estimates, (1) FSN Ecommerce estimates from Factset Consensus

Confidential | Investec

21
 Questions for Management

• How do we see the journey from online heavy to an increasing share of offline sales (especially GT) to unfold? How many outlets
can we target in general trade as a realistic universe? What is an ideal mix according to the management? What are the initial
challenges faced in general trade and how are we overcoming them?
• What is our view of the traditional FMCG companies looking to get their act together in this space through both organic and
inorganic route? Would the higher competitive intensity impact our growth prospects? Overall view on competitive intensity across
new age and traditional players?
• What will drive our trajectory of profitability going forward. We are at single-digit operating margins in spite of almost Rs10bn in
sales in FY22; what is the scale, online mix, reduced burn rate of new brands needed to achieve a higher margin trajectory?
Targets on profitability over the next few years and which line items will drive this?
• Comment on the management team and how it has been expanded over the last few years to deal with the increasing scale
across brands and channels? Any more key hires we expect to make? How is the brand leadership architecture?
• What is our incremental view on own manufacturing given that all our manufacturing is contract?
• Can you give us a detailed walk through of your playbook that you believe can be effectively used on new organic and inorganic
brands in order to scale them up further?
• How do we see the mix of Mamaearth as a % of our overall revenues changing over the next several years?
• Categories that we do not play in currently and wish to enter into going forward? Any non BPC ambition?
• We have mentioned salon, EBO and international expansion in our DRHP. How much time and capital would be required for these
3 segments over the next few years? Idea is to understand the scale of our plans here?
• Can you give your view on the working capital trajectory and how that is expected to change with the change in channel mix as
well as increasing SKU count? How do you manage SKU count given that we are innovating at a rapid pace?

Confidential | Investec
Source: DRHP, Investec securities research. 22
Honasa Consumer – Summary of Observations

• Honasa Consumer is the largest new age BPC company in India with Mamaearth as its core brand and a portfolio of newer brands built both
organically and inorganically.
• The company’s growth has been meteoric given annualised revenues of over Rs14bn (basis 6MFY23 numbers), implying a 14x revenue move
from FY20-23. The scale is ahead of peers and the house of brands architecture is one that has replicated by very few peers in the new age
space.
• Gross margins are ahead of listed peers in BPC given Honasa is a pure play BPC company. However, EBITDA margins are significantly lower
than listed peers primarily due to a) higher employee costs and b) a much higher increase in advertising spends. Efficiency in cost heads not
withstanding, we believe the largest delta to profitability improvement will have to come from the ad spends to sales ratio.
• Distribution remains a key strategic driver for growth as mentioned in the DRHP. The company’s success in the offline channel will be a key
determinant to future growth, especially for the core brand Mamaearth. Further, expansion in salons, EBOs and international markets will also
be key monitorables.
• Apart from Momspresso, the brand innovation success rate, as stated in the DRHP seems to be strong and indicative of the playbook the
company has mentioned. As it looks to build a house of brands beyond the current portfolio, the relative success of this strategy could
determine the pace of growth as the core brand Mamaearth’s base becomes larger.
• Competitive intensity from new age and traditional companies remains the key factor; how Honasa navigates this will determine both revenue
growth sustenance and pace of margin expansion.
• The company has grown so far without adding manufacturing capabilities and has also maintained a good working capital cycle. While we
believe capturing manufacturing synergies at this time in the life cycle of the company will not be necessary, it will be interesting as to when
this will change and its implications on the return profile of the company.
• As in every company, senior management continuity is critical in driving new legs of growth. The fact that the company has its founders as two
key people at the helm of the company makes this a lesser risk. However, acquiring and retaining new talent will be critical going forward as the
company looks to expand product and channel mix.
• Valuation methodology for investors would likely be through a relative benchmarking with traditional BPC heavy companies in the listed space
and the leading BPC aggregator, FSN E-commerce.

Confidential | Investec
Source: DRHP, Investec securities research.
23
Honasa summary financials
Profit and Loss statement Balance Sheet

Summary PL FY20 FY21 FY22 6MFY23 Balance Sheet FY20 FY21 FY22 6MFY23
Net Sales 1,097.8 4,599.9 9,434.7 7,227.4 Non Current
1,562.6 2,098.2 8,274.2 8,617.4
COGS 367.8 1,327.1 2,834.4 2,232.9 Liabilities
Gross Profit 730.1 3,272.8 6,600.3 4,994.5 ESC 0.1 0.1 0.1 1,363.0
Gross Margin% 66.5% 71.2% 70.0% 69.1% Reserves and
-4,371.9 -17,651.6 7,056.2 5,916.4
Surplus
Long term
31.1 156.8 219.6 168.5 5,927.6 19,540.0 0.0 0.0
Manufacturing Expenses Borrowings
Employee Cost 89.0 277.6 788.5 777.9 Others 6.8 209.6 1,217.9 1,338.0
688.5 2,566.4 5,477.6 4,014.8 Current Liabilities 247.4 928.2 2,076.0 2,939.6
Selling and Distribution
EBITDA -78.5 272.1 114.6 33.3 Trade Payables 219.0 803.4 1,703.5 2,276.2
EBITDA Margin% -7.1% 5.9% 1.2% 0.5% Borrowings 0.0 0.0 35.9 72.5
Other Current
Depreciation 6.5 17.1 69.0 110.4 28.4 124.8 336.6 590.9
Liabilities
Interest 0.5 9.8 30.1 30.7
Total 1,810.0 3,026.4 10,350.2 11,557.0
Other Income 43.8 121.1 208.8 93.3
Profit before tax and extraordinary items -41.6 366.3 224.4 -14.4
Non Current
13.8 273.0 4,329.5 4,956.2
Assets
4,238.7 13,612.4 0.0
Change in fair valuation of preference shares Capitalised Assets 10.1 210.9 3,434.7 3,956.9
0.0 0.0 0.0 0.0 Others 3.7 62.1 894.8 999.3
Extraordinary Items
PBT -4,280.3 -13,246.1 224.4 -14.4 Current Assets 1,796.3 2,753.4 6,020.5 6,602.7
Tax 0.0 76.1 80.0 54.6 Cash 1,507.4 1,851.8 4,261.9 3,379.6
PAT -4,280.3 -13,322.1 144.4 -69.0 Trade Receivables 106.1 338.4 727.9 1,419.0
Adjusted PAT -4,280.3 -13,322.2 157.1 -28.8
Inventory 136.7 413.5 658.5 1,221.3
-389.9% -289.6% 1.7% -0.4%
Adjusted PAT Margin% Others 46.1 149.7 372.2 582.9
Total 1,810.1 3,026.4 10,350.0 11,559.0
Adjusted EPS -15.2 -47.3 0.5

Confidential | Investec

Source: DRHP 24
 Honasa summary financials
Cashflow statement

Summary Cashflow FY20 FY21 FY22 6MFY23

Cash flows from operating activities
Profit before tax -4,280.3 -13,246.1 224.4 91.3
Adjustments for:
Depreciation and amortisation expenses 6.5 17.1 69.0 110.4
Profit/loss on investments -36.3 -98.9 -132.3 -34.4
Loss/(Profit) on sale of property, plant and equipment 0.1 0.4 0.0
Finance costs 0.5 9.8 30.1 30.7
Provisions / Miscellaneous balances written back 4,246.2 13,660.9 202.2 170.7
Interest income -7.1 -19.4 -66.6 -51.1
Operating profit before working capital changes and other
adjustments -70.5 323.6 327.2 317.6
(Increase) / decrease in Inventories -122.7 -280.7 -212.7 -578.8
(Increase) / decrease in Trade receivables -80.7 -235.4 -331.2 -705.7
Increase / (decrease) in Trade payables 181.9 584.4 874.4 572.6
Increase / (decrease) in others -11.6 -31.8 -117.1 -233.8
Cash (used in) / generated from operating activities -103.6 360.1 540.6 -628.1
Income-taxes paid (net of refunds) 0.0 -62.9 -94.6 -27.9
Net cash (used in) / generated from operating activities -103.6 297.2 446.0 -656.0

Cash flows from investing activities

Acquisition of property, plant and equipment (including capital work-
-4.6 -10.2 -26.1 -42.8
in-progress) and other intangible assets
Interest received 0.7 24.5 28.1 25.7
Purchase/Sale of Investments -1,165.3 -220.4 -2,803.8 615.3
Other investment activities - - -2,195.6 -143.8
Net cash (used in) / generated from investing activities -1,169.3 -206.1 -4,997.4 454.5

Confidential | Investec

Source: DRHP 25
 Honasa summary financials
Cashflow statement
Summary Cashflow FY20 FY21 FY22 6MFY23
Proceeds from Debenture/Bonds 1,290.0 4,864.0
Short term borrowing -24.0
Proceeds from Issue of Equity Share Capital / Buyback 0.4 0.9 1.4 48.4
Interest paid -0.2 -1.7 -4.3 -5.4
Other Financial Activities -3.6 -12.0 -53.0 -68.5
Net cash generated from / (used in) financing activities 1,286.6 -12.8 4,808.1 -49.5

Net increase / (decrease) in cash and cash equivalents (A+B+C) 14.1 78.4 256.7 -251.1
Cash and cash equivalents at the beginning of the period/year 5.1 19.2 97.6 273.9
Cash and cash equivalents at the end of the period / year 19.2 97.6 304.1 22.8

Confidential | Investec

Source: DRHP 26
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