Honasa Consumer shares fall 20% after weak Q2 results; it hits the ground circuit
Honasa Consumer, the parent company of D2C brand Mamaearth, saw its share price drop by 20 per cent during the morning session on November 18, hitting a regional low of Rs 297.25 on the NSE. The sharp decline led the stock to fall below its IPO price of Rs 324 per share, reflecting investor disappointment following the company’s Q2 FY25 results.
Honasa posts its first quarterly loss in five quarters
In the July-September quarter, Honasa Consumer reported a net loss of Rs 19 crore, marking its first quarterly loss in over a year. This is in stark contrast to the Rs 29 crore profit it reported in the same quarter last year. The company’s revenue was also affected, falling seven percent year-on-year to Rs 462 crore, down from Rs 496 crore in the corresponding period last year. The decrease in revenue was due to lower demand and disruptions related to changes in distribution strategy.
Total expenses rose nine percent year-on-year, to Rs 506 crore, despite a sequential decline. Honasa’s shift to a direct-to-consumer (D2C) model under Project ‘Neev’ has led to significant inventory restructuring, which has also impacted the bottom line. Advertising and marketing expenses rose to thirty-nine percent of revenue, up from thirty-five percent last year, reflecting aggressive spending to drive demand amid challenging market conditions.
Retailers reacted with mixed views
Brokerages are divided in their response to Honasa Consumer’s Q2 performance. Jefferies maintained a ‘buy’ call but lowered the price target to Rs 425 per share from Rs 545 earlier. Jefferies acknowledged the good performance of the quarter but expressed optimism about management’s plans to get the business back on track. “Although losses and high inventory adjustments are concerning, we continue to trust the long-term vision of the founders,” the brokerage said.
Goldman Sachs downgraded its rating to ‘neutral’ from ‘buy’, lowering its price target to Rs 375 from Rs 570. It highlighted weak demand trends, particularly in Mamaearth’s skin care portfolio, as a major risk factor.
As investors express concerns about liquidity and ongoing challenges in the D2C transition, Honasa stock is expected to face continued pressure in the short term. Analysts warn that the turnaround could take two to three more quarters as the company expands its new distribution channels and stabilizes inventory levels.
