Honasa’s Q3 Profit Flat At INR 26 Cr

Mamaearth parent Honasa Consumer reported a consolidated net profit of INR 26.02 Cr in the third quarter of fiscal year 2024-25 (Q3 FY25), a marginal 0.4% increase from INR 25.90 Cr in the year-ago quarter.

Sequentially, the company recovered from an INR 18.58 Cr loss. While EBITDA declined 24% YoY to INR 26 Cr, EBITDA margin also contracted to 5% from 7.1% in Q3 FY24. 

Despite the slide in EBITDA, the company claims to be back on a “growth trajectory” with a “gradual” scale up in general trend. 

Meanwhile, the top line saw a healthy upsurge in the quarter. Honasa’s revenue from operations grew 6% to INR 517.51 Cr during the quarter under review from INR 488.22 Cr in Q3 FY24. On a quarter-on-quarter (QoQ) basis, it rose 12% from INR 461.82 Cr. 

However, its underlying volume growth (UVG) stood at 1.5% YoY for the quarter, a fourth of its revenue growth. The company attributed this to a channel-mix impact due to a transition in its general trade. 

‘Project Neev’ To Improve Distribution

The said transition pertains to inventory correction under ‘Project Neev’, which Honasa started implementing in Q2 FY25. Under this, the company discontinued distribution of its products to distributors in its super stockist layer and some of its direct distributors and replaced them with higher quality or Tier-I distributors to service retailers across top 50 cities. 

At the end of the December quarter, the company said it has completed the appointment of the said Tier-I distributors. In its investor presentation, the company informed that these Tier-I distributors are mature FMCG/ BPC players. 

As a result, the company’s distributor channel now comprises 69% direct distributors and 31% super stockists. At the end of FY24, super stockists comprised 62% super stockists and 38% direct distributors.

“Consequent to the transition, sales return of INR 63.52 Cr has been approved for with resulting inventory/ right to return asset of INR 11.44 Cr (net provisions of INR 6.98 Cr) in the quarter ended September 30, 2024. As at December 31, 2024, the holding company has outstanding provision for sales return of INR 8.95 Cr with resulting right to return asset of INR 1.10 Cr (net provision of INR 1.5 Cr),” Honasa said. 

Project Neev not only hit the company’s bottom line in Q2 FY25 but also led to a war of words between it and the All India Consumer Products Distributors Federation (AICPDF) in November. 

Back then, the AICPDF flagged large unsold inventory of Honasa lying with distributors and retailers. This, it claimed, was causing a financial burden of INR 300 Cr. It also said that besides the issue of “unsold stocks nearing expiry”, credit notes of about INR 50 Cr were unsettled, which was creating cash flow challenges and threatened the stability of the entire distribution network. However, Honasa denied the allegations then. 

In its earnings statement today, Honasa cofounder and CEO Varun Alagh said, “In Q3 FY25, we remained committed to long-term growth, advancing the strategic implementation of Project Neev to strengthen our offline distribution through direct distributors in the top 50 cities… As we scale, our vision remains centered on driving disruptive innovation, deepening offline penetration, and delivering unique value propositions to consumers.” 

Honasa’s ‘House Of Brands’ Play

The D2C company claimed that its flagship product, Mamaearth, grew in market share and household penetration during the quarter, reaching 2.17 Lakh FMCG retail outlets in India as of December 2024 and recorded a 22% YoY increase in its distribution. It also claimed that Mamaearth’s facewash gained 114 basis points (bps) and shampoo gained 20 bps in YoY value market share during the quarter. 

Besides Mamaearth, Honasa has The Derma Co., Aqualogica, BBlunt, BBLunt Salone and Dr. Sheth’s in its portfolio. The company said that the other brands “saw continued growth momentum with 30%+ YTD YoY growth”.

In Q1 FY25, Honasa’s board approved the amalgamation of two of its wholly owned subsidiaries – Just4Kids Services Private Limited and Fusion Cosmecutics Private Limited – with itself.

In its Q3 disclosure, the company informed that the amalgamation received the first motion approval by NCLT Delhi and NCLT Chandigarh and is awaiting response on its second motion application. 

Zooming Into Honasa’s Expenses

Honasa Consumer spent INR 507.31 Cr in Q3 FY24, up 9% YoY and 0.2% QoQ. 

Purchase Of Traded Goods: Expenses under this bucket rose 8.5% YoY to INR 148.30 Cr in Q3 F25. Sequentially, these expenses came down 22% from INR 189.22 Cr. While the company saw an increase of INR 45 Cr in its inventories of traded goods in the previous quarter, the same decreased by INR 7.19 Cr in Q3 FY25.

Employee Benefit Expenses: Employee costs rose 17% YoY to INR 51.79 Cr during the quarter under review. This included a reversal of share based payment of INR 4.75 Cr which the company said were reversed from the promoters of Momspresso’s ESOP expenses.  

For context, the promoters of the amputated subsidiary resigned from their employment with Honasa before fulfilling the vesting conditions of the company’s ESOP pool in FY24.

Ad Expenses: Mamaearth’s parent spent INR 177 Cr to promote itself during the quarter, a 6.6% increase from INR 166 Cr in the year-ago quarter.

Ahead of the release of the Q3 results, shares of Honasa ended today’s trading session 2.64% higher at INR 206.20 on the BSE. During the intraday trading, the company’s shares touched a fresh 52-week low of INR 197.15.