For Honasa Consumer, the parent of beauty and personal care brand Mamaearth, the worst might be over. Over the past six quarters, the company has managed to steadily revive its financials from a loss of Rs 19 crore in the second quarter of FY25 to a profit of Rs 50 crore in the third quarter of the current fiscal. Brokerages, too, are encouraged by its margin expansion — now at 10.9% and up from 5% a year ago — alongside healthy topline growth.
In a research note, analysts at Jefferies said that although Honasa’s journey has been bumpy, the company is steadily emerging from this, a recovery they believe could help rebuild investor confidence. The stock, currently at Rs 298.7, has fallen 36% since July 2024, before it slipped into losses following its distribution overhaul, and is trading nearly 8% below its IPO price of Rs 324.
Brokerage lifts Ebitda view 17–21% after strong Q3
The brokerage raised its earnings before interest, taxes, depreciation and amortisation (Ebitda) estimates by 17-21% to factor in the strong third-quarter performance. In the December quarter, Honasa nearly doubled its net profit, while revenue grew 16% year-on-year at Rs 602 crore.
But this revival comes after quarters of muted growth. Just over a year ago, in late 2024, the company announced that it was transitioning from super-stockists to direct distributors in top 50 cities. Under the super-stockist model, companies rely on large regional wholesalers to supply products to sub-distributors and smaller retailers, while the direct distributor model involves working more closely with a wider network of city-level partners, giving companies greater control over its pricing and inventory.
Prior to this announcement, in July, All India Consumer Products Distributors Federation (AICPDF) accused Honasa of pushing excessive inventory into the channel without properly factoring in market demand, resulting in large volumes of unsold inventory piled up with distributors and retailers. The distributors’ body estimated the financial burden of the near-expiry inventory at nearly Rs 300 crore.
While Honasa denied these allegations and said its distribution value chain carried a total inventory of Rs 40.69 crore (not the Rs 300 crore claimed), the company took a Rs 65-crore write off on its offline distribution stock in Q2FY25.
Besides the write-off, the distribution restructuring, which it termed “Project Neev”, also resulted in a 7% decline in revenue to Rs 462 crore and negative margins of 6.6% in Q2FY25, following five quarters of positive margins.
Management flags deeper inventory hit
During the post-earnings call with analysts, the management noted that the impact of the inventory correction is higher than they had expected earlier. They also acknowledged that trying to implement the same online playbook to offline channels was not working out, and that it needed to revise this playback to grow its retail channel.
In the quarters that followed, the company also narrowed Mamaearth’s focus to five key categories — shampoo, face serum, suncare, moisturiser, and baby care — after previously operating across as many as 24 segments. Mamaearth is the flagship brand of Honasa and constitutes the majority of its revenue. Meanwhile, the younger brands include The Derma Co, Aqualogica, Dr Sheth’s, BBlunt, and its colour cosmetics line Staze 9to9.
After taking a financial hit in Q2FY25, the company’s margins have slowly rebounded and are now above pre-FY25 levels. While brokerages remain cautious and are closely tracking the turnaround, they are watching for signs of sustained growth following the restructuring. The Jefferies’ analysts expect Honasa to deliver sector-leading revenue growth in the coming years, alongside improving profitability.