Shilpa Shetty likely to earn massive return from Mamaearth IPO: How does it compare with Alia, Katrina’s Nykaa profit?

Investing early in new-age firms has recently become a trend among actors. Like Alia Bhatt and Katrina Kaif were a part of Nykaa since the initial days and received excellent returns on the listing of the e-commerce site, Shilpa Shetty may earn significant returns from the Mamaearth IPO.

The ₹1,701 crore initial public offering of Honasa Consumer Limited, popularly known as Mamaearth, opened on October 31.

As per the RHP, Shilpa Shetty Kundra has invested ₹6.7 crore in the company, acquiring over 16 lakh shares at ₹41.86 apiece. The actor will be selling 13.93 lakh shares in the offer for sale (OFS) portion of the IPO. The price band is set at ₹308-324.

On an investment of ₹5.83 crore (for the 13.93 lakh shares she will be offloading), the ‘Baazigar’ actress is likely to earn around ₹39.30 crore from this public issue, irrespective of the kind of listing Mamaearth IPO gets. This is over 674 times her initial investment of ₹5.83 crore.

The massive returns

As per the details available in DRHP, actress Shilpa Shetty has offered 13,93,200 company shares to offload in this upcoming IPO, which she had bought at ₹41.86 per equity share. So, her net investment in these shares offered for sale is ₹5,83,19,352 or around ₹5.83 crore.

As Mamaearth's IPO price band has been fixed at ₹308- 324 per equity share and it has been found most of the time that shares are allotted at the upper price band to the applicants, Shilpa Shetty's shares would likely be sold out at ₹324 per share level. Hence, the amount generated after offloading her shares would be ₹45,13,96,800 or around ₹45.13 crore.

So, Shilpa Shetty would earn ₹39,30,77,448 or around ₹39.30 crore ( ₹45,13,96,800 crore - ₹5,83,19,352) from this upcoming IPO.

Comparison with Katrina Kaif and Alia Bhatt

Both Katrina Kaif and Alia Bhatt were early investors in Nykaa and earned substantial sums on its listing.

Alia Bhatt had invested ₹4.95 crore in the parent company of Nykaa, FSN E-Commerce Ventures, in July 2020 and her return was estimated to be ₹54 crore. This was over 1,090 times the invested amount.

Similarly, Katrina Kaif entered into a joint venture with the company in 2018 to set up Nykaa-KK Beauty and had invested ₹2.04 crore in the company. As per reports, her shares were worth ₹22 crore on November 10, 2021, implying that returns were 1,078 times the invested amount.

Nykaa was listed on the bourses on November 10, 2021, after getting subscribed to a whopping 82 times.

Nykaa made a strong market debut at a 79 percent premium at ₹2,001 per share on the BSE versus its issue price of ₹1,125. However, since then, the stock has been on a downtrend.

The Nykaa stock has been under relentless selling pressure ever since the company's lock-in period expired for pre-IPO investors and the bonus issue announcement. Nykaa stock is down over 58 percent from its adjusted 52-week high of ₹364.16.

About the Mamaearth IPO

The IPO, which closes on November 2, comprises of a fresh issue of equity shares worth ₹365 crore and an offer-for-sale (OFS) component of 4,68,19,635 equity shares by promoters, investors, and other selling shareholders.

Apart from the ‘Baazigar’ actor, those offering shares in the OFS include promoters - Varun Alagh and Ghazal Alagh - and investors like Fireside Ventures Fund, Sofina, Stellaris, Kunal Bansal and Rohit Bansal, Rishabh Harsh Mariwala of FMCG firm Marico.

Post IPO, the shareholding of promoters would come down to 35.3 percent. Ahead of the IPO, the firm allotted 2.36 crore equity shares to 49 anchor investors and raised ₹765.20 crore.

Mamaearth IPO has reserved not less than 75 percent of the shares in the public issue for Qualified Institutional Buyers (QIB), not more than 15 percent for Non-Institutional Investors (NII), and not more than 10 percent for retail investors. A discount of ₹30 per equity share is being offered to eligible employees bidding in the employee reserve portion.

A bidder will be able to apply in lots and one lot of the public issue will have 46 company shares. The minimum amount required to apply for the IPO is ₹14,904 ( ₹324 x 46).

About the firm

Started in 2016, Honasa Consumer which owns a portfolio of brands like Mamaearth, The Derma Co, Aqualogica, Ayuga, and BBlunt, claims to be the largest digital-first beauty and personal care (BPC) company in India in terms of revenue for FY23.

Its revenue from operations grew at a CAGR of 80.14 percent during FY21-FY23, to ₹1,492.75 crore in FY23 with volume growth of 102.28 percent, but the company posted a net loss of ₹142.8 crore during the year ended March FY23.

Meanwhile, the company reported a revenue of ₹464.5 crore in Q1FY24 and a profit of ₹2.47 crore.

Other investors

Along with Shilpa Shetty, some other investors also stand to earn exceptional returns via this issue. Snapdeal co-founders Kunal Bahl and Rohit Kumar Bansal acquired 23,86,500 shares each in the company at an average cost price of just ₹3.21 per share in August 2017. At the upper price band of ₹324, they are likely to earn a massive profit of ₹38.27 crore, translating into a 9,993 percent return.

As per the RHP, both Bahl and Bansal are selling 11,93,250 shares each in the OFS. They had invested just ₹38.30 lakh each in the 11.9 lakh shares they will offload in the OFS.

Similarly, Rishabh Harsh Mariwala, the son of Marico founder Harsh Mariwala, is also selling around 57 lakh shares bought at ₹6.05 per share. At the upper end of the price band, he is likely to get a return of 5,255 percent on his investment.