Honasa Consumer, the parent company of direct-to-consumer beauty and personal care brand Mamaearth, plans to use proceeds from its Rs 2,900 crore initial public offering (IPO) for marketing campaigns and expand its offline presence across critical brands.

Proceeds will be used for advertising expenses to increase brand awareness and awareness, capital expenditure for the new Exclusive Brands Boutique (EBO), and new salons by investment company subsidiary BBlunt (Bhabani Blunt Hairdressing), general corporate purposes and unspecified inorganic acquisition.

According to the company’s DRHP (Draft Red Herring Prospectus), the company will spend Rs 186 crore of the net proceeds on marketing activities over the next four years.

Besides Mamaearth, Honasa operates five other brands: The Derma Company, Aqualogica, Ayuga, Dr Sheth and BBlunt.

Honasa plans to open 132 new EBOs across India by FY2026 through a mix of the mall and high street stores and proposes to spend Rs 34.2 crore in net proceeds on expansion.

The company’s capital expenditure of around Rs 52 lakh in FY2022 and Rs 1.4 crore in the six months ending September 30, 2022, represented 0.06% and 0.19% of Honasa’s operating revenue for the same period, respectively.

The company also proposed to use Rs 27.5 crore of the net proceeds to invest in BBlunt to open 20 new salons by 2026. As of September 30, 2022, there are 9 Blunt salons across two regions in India.

In addition, the amount used for general corporate purposes and unspecified inorganic acquisitions will not exceed 35% of the net proceeds.

Amounts for general corporate purposes may be at most 25% of net proceeds.

For the fiscal year ended March 31, 2022, the company posted a profit of Rs 14.4 crore against a restated loss of Rs 1,332 crore for FY21 and Rs 428 crore for the fiscal year ended March 2020. The company doubled its operating income to Rs 943 crore from Rs 459 crore in FY21 and Rs 109 crore in FY20. The six months’ revenue ended September 30, 2022, at Rs 723 crore.

India’s beauty and personal care products market is expected to grow from approximately $17 billion in 2021 to roughly $30 billion by 2026 at a CAGR of about 12%, topping the broader retail category and outperforming other retailers. The category was faster in India during the period, according to RedSeer. The beauty and personal care products market is well-suited for digital penetration. The online beauty and personal care market, valued at $2.5 billion, is expected to grow at an annual rate of 27% to reach around $8.4 billion by 2026, translating to an online penetration rate of 28%.