Honasa Consumer Ltd., the parent company of the popular skincare brand Mamaearth, has released its financial results for the second quarter of FY25. The company reported a drop in revenue and a net loss, reflecting both challenges and ongoing strategic changes aimed at long-term growth. Despite the dip in profits, Honasa is optimistic about its future as it repositions itself for a stronger market presence.
Key Financial Highlights: Revenue Decline and Losses
For the quarter ending September 30, 2024, Honasa posted consolidated revenue from operations of Rs 461.8 crore, marking a decline of 6.9% compared to Rs 496.1 crore in Q2 FY24. However, after adjusting for inventory correction, the company’s revenue for the quarter stood at Rs 525 crore, showing a modest 5.7% year-on-year growth.
Despite this growth in adjusted revenue, Honasa incurred a net loss of Rs 18.57 crore, primarily due to a one-time inventory correction and costs associated with its ongoing strategic overhaul, Project Neev. This contrasts with a profit of Rs 29.43 crore in the same quarter last year. The loss also follows a profit of Rs 40.2 crore in Q1 FY25, highlighting a significant decline in profitability.
What Led to the Losses? Strategic Changes and One-Time Expenses
The primary reason for the drop in profits can be traced to Honasa’s decision to revamp its distribution model as part of Project Neev. The company transitioned from relying on super-stockists to direct distributors in the top 50 cities in India. While this shift is expected to strengthen Honasa’s offline presence in the long run, it had a short-term impact on both revenue and profitability.
CEO Varun Alagh explained that although the changes were disruptive in the short term, they were crucial for the company’s growth strategy. “Our focus remains on strengthening our offline distribution network and returning Mamaearth to its growth trajectory,” said Alagh.
Additionally, the company’s EBITDA margin, which is a key indicator of operational efficiency, dropped to -6.6% for the quarter. However, after adjusting for the inventory correction, the margin improved to 4.1%. The total expenses for the quarter rose by 9% year-on-year, amounting to Rs 506 crore, though they were lower than the previous quarter.
Focus on Emerging Brands: A Bright Spot for Honasa
Despite challenges with its flagship Mamaearth brand, Honasa has seen impressive growth in its emerging brands portfolio. The first half of FY25 saw a 30% year-on-year growth across brands like The Derma Co., Aqualogica, BBlunt, and Dr. Sheth’s. These brands have been gaining traction in their respective categories, including skincare, haircare, and personal care.
Honasa’s focus on innovation has also paid off. The company introduced new product ranges, such as moisturizers, across its brands to meet diverse consumer needs. This expansion into new product categories is expected to drive future growth, especially as consumers increasingly seek skincare solutions tailored to their specific needs.
Strong Performance in Key Product Categories
In terms of market share, Mamaearth’s popular products, such as face washes and shampoos, have made gains in the offline market. According to NielsenIQ data, Mamaearth has increased its value market share by 125 basis points in the year leading up to September 2024.
This indicates that despite the revenue challenges, Mamaearth’s products continue to resonate with consumers, particularly in the highly competitive beauty and personal care sector. The company’s ability to innovate and expand into new product areas is likely to contribute to its long-term success.
Looking Ahead: A Long-Term Strategy for Growth
Honasa’s management remains confident about the company’s future prospects. Despite the short-term setbacks, the company is seeing solid growth in its core categories and emerging brands. For the first half of FY25, the company reported an adjusted revenue growth of 12.3%, outpacing competitors in the beauty and personal care market.
Varun Alagh emphasized that the company’s long-term goals are focused on scaling its key categories and becoming one of the top three leaders in India’s beauty and personal care space within the next three to five years. “We are constantly learning and evolving to meet the changing needs of Indian consumers,” said Alagh. “Our long-term vision remains steadfast: to shape the future of the beauty and personal care industry in India.”
Conclusion: Challenges Now, But Optimism for the Future
While Honasa Consumer Ltd. has faced a difficult quarter with declining revenue and net losses, its strategic shifts and focus on innovation suggest that it’s positioning itself for sustainable growth. The changes brought about by Project Neev, along with the strong performance of emerging brands, offer a promising outlook for the company.
Honasa’s commitment to strengthening its offline distribution and expanding its product portfolio will be key to its recovery and future success. As the company continues to innovate and adapt to market demands, it remains focused on becoming a dominant player in India’s competitive beauty and personal care market.
