Honasa Consumer Limited, the parent company of popular beauty brands Mamaearth, The Derma Co, and Aqualogica, has announced a remarkable turnaround in its financial performance, reporting a profit after tax of ₹39 crore for the September quarter. This marks a significant improvement from the loss of ₹18.5 crore recorded during the same period last year, according to founder and CEO Varun Alagh.
Strategic Expansion into New Categories
The company is now setting its sights on expanding into new growth areas, particularly oral care and premium skincare segments. As part of this strategic move, Honasa has acquired a minority stake worth ₹10 crore in Fang Oral, an oral care brand operated by Couch Commerce Pvt Ltd. This investment will enable the company to introduce teeth-whitening products and electric toothbrushes to capture the emerging oral beauty market in India.
"We're seeing the rise of oral beauty is already happening and could start taking shape in India in the next decade," Alagh stated during the September quarter earnings call with analysts. "There is a lot of premiumization potential in this category. Within the beauty and personal care landscape, this can be a $700 million opportunity."
Quarterly Performance and Revenue Growth
The company demonstrated strong operational performance with operating revenue climbing to ₹538 crore in the September quarter, representing a healthy 17% increase compared to the same period last year. However, despite the year-on-year profit growth, the net profit showed a sequential decline from ₹41 crore recorded in the June quarter, primarily due to increased operational expenses.
Honasa also addressed a recent accounting change triggered by Flipkart Group's revised seller invoicing structure. The e-commerce platform now deducts logistics and fulfillment costs directly from revenue instead of listing them separately. While this change resulted in lower reported revenue figures, Alagh clarified that it has no material impact on the company's bottom line.
Project Neev: Transforming Distribution Networks
The company's improved quarterly performance comes as a welcome relief as it recovers from the operational challenges of transitioning its offline distribution model. Under Project Neev, implemented in the third quarter of FY24, Honasa shifted to a direct distribution approach in the top 100 cities, moving away from its previous reliance on super stockists.
Alagh provided updates on this strategic transition: "This time last year, the contribution from super-stockists accounted for two-thirds of our offline distribution. However, more than 80% of our distribution came from direct distributors last quarter. The change was hard but necessary and forms the foundation of the future growth of our various brands."
While this distribution overhaul initially impacted revenue in subsequent quarters, the company believes it will ultimately enhance efficiency, quality, and long-term margins.
Core Business Strength and Premium Focus
Honasa's core product categories, including face washes, sunscreen, moisturizer, and shampoo, now constitute 75% of total revenues, up from 70% last year. The company's younger brands – Bblunt, Aqualogica, Dr Sheth's, and Staze – collectively grew 20% year-on-year during the September quarter.
The company is increasingly focusing on premium and prestige skincare segments to boost market share and brand loyalty. "We will continue to focus on core categories to find avenues for revenue growth and grow market share using innovation," Alagh emphasized.
In a recent strategic move, Honasa launched Luminéve, a prestige night skincare brand in partnership with beauty retailer Nykaa. The brand focuses on active ingredients like collagen, peptides, and niacinamide. Alagh expressed optimism about the prestige skincare market, estimating it could reach $4 billion in the next few years.
Quick commerce has emerged as another significant growth driver, contributing nearly 10% to overall revenue and helping the company navigate increasing competition in the beauty and personal care segment.
Investors responded positively to the results, with Honasa's shares closing 3.31% higher at ₹283.95 apiece on the NSE following the announcement.
