Honasa Consumer Ltd, the Force Behind D2C Unicorn Mamaearth, Sees a Remarkable 94% Surge in Q2 Profits

Q2 FY24 Witnesses Profit After Tax (PAT) Climbing to INR 29.4 Cr

Honasa Consumer Ltd, the parent company overseeing the immensely popular Mamaearth D2C brand, has disclosed a substantial upswing in its profit after tax (PAT) for the second quarter (Q2) of the fiscal year 2023-24 (FY24). The PAT has experienced a striking 94% surge, reaching INR 29.4 Cr as opposed to INR 15.2 Cr in the prior year’s corresponding quarter. Concurrently, the operating revenue has demonstrated a significant upturn, escalating by 21% to INR 496.1 Cr from INR 410.5 Cr in Q2 FY23.

Mamaearth’s Evolution and Product Spectrum

Established in 2016 by Varun and Ghazal Alagh, Mamaearth has carved a niche for itself with an expansive array of beauty and personal care products spanning hair care, body care, and makeup. Operating under the aegis of Honasa Consumer, Mamaearth collaborates with other brands such as The Derma Co., Aqualogica, Ayuga, BBlunt, and Dr. Sheths.

Varun Alagh, Chairman and CEO, Reflects on Positive Outcomes

Chairman and CEO of Honasa Consumer, Varun Alagh, expressed his contentment with the robust Q2 results. Alagh remarked, “Honasa has achieved remarkable growth, outperforming the market and continually enhancing the company’s profitability. Our business has registered a 33% year-on-year growth in H1 FY24, surpassing the median growth of FMCG companies in India by 3.8 times.” He also highlighted the extraordinary profit growth, with H1 PAT surging by a staggering 1,377% to INR 54 Cr. Dr. Sheths has joined Aqualogica and The Derma Co. as the fourth brand from the Honasa portfolio to enter the prestigious 150 Cr club.

Financial Revival and Strategic Endeavors of Mamaearth

While Mamaearth encountered a net loss of INR 151 Cr in FY23, the company has experienced a robust resurgence, achieving a PAT of INR 54.1 Cr in H1 FY24. Honasa emphasized that the company’s year-on-year growth of 33% in H1 outpaced the median growth of FMCG companies, which stood at 9%.

Total Spending Reaches INR 464 Cr

Mamaearth’s financial report for Q2 illuminates a substantial increase in total spending, witnessing an 18.2% surge to INR 464 Cr from INR 392.3 Cr in the preceding year’s corresponding quarter. Particularly noteworthy is a marginal decrease of just over 1% year-on-year in spending on purchased goods, totaling INR 145.4 Cr in Q2.

Reduction in Employee Benefit Expenses

During the same period, Mamaearth observed a decline in employee benefit expenses, falling to INR 37.1 Cr from INR 39 Cr in Q2 FY23. The company attributed this reduction to the closure of its Momspresso platform, aligning with previous reports by Inc42 detailing Mamaearth’s restructuring at Momspresso due to escalating losses.

Deeper Dive into Restructuring and Impairment

In its financial filing, Honasa outlined the restructuring of Momspresso, with the promoters resigning from their positions in the quarter. The vesting conditions for employee stock options (ESOPs) were not met, resulting in the reversal of a share-based payment expense of INR 47.47 Mn (INR 1.7 Cr) during the quarter.

The Holding Company took the initiative to acquire the remaining stake in Momspresso for INR 230.08 Mn (INR 23 Cr) on September 12, 2023, based on a Share Purchase Agreement entered into on August 25, 2023. Although the acquisition aimed to bolster content and influencer management capabilities, the dwindling performance and profitability of Momspresso prompted the Group to account for an impairment loss of INR 1,360.63 Mn (INR 136 Cr) related to goodwill, software, and trademarks.

Market Response and Final Thoughts

Despite the positive financial results, Mamaearth’s shares concluded Wednesday’s (November 22) trading session 4% lower at INR 352.1 on the BSE. The company’s adept handling of challenges and pursuit of strategic initiatives will undoubtedly attract scrutiny from industry observers as it continues to assert its presence in the fiercely competitive D2C market.