Mamaearth Parent Honasa Consumer Faces Sharp Losses as Stock Plunges 20%: What Went Wrong?

It’s a miserable Monday for Mamaearth’s parent company, Honasa Consumer. Shares of the company plunged by 20% in early trading on 18 November, hitting the lower circuit at ₹297. With this sharp decline, the stock is now trading below its IPO price of ₹324 per share.

What Led To The Fall?

The sharp decline in share prices of Honasa Consumer, which also operates other brands like The Derma Co, Aqualogica, Dr Sheth’s, and BBlunt, followed poor Q2 FY25 earnings. The company reported a net loss of ₹19 crore—its first in five quarters—compared to a net profit of ₹29 crore in Q2 FY24. Revenue also shrank by 6.9% year-on-year, dropping from ₹496 crore to ₹462 crore.

Why The Poor Q2 Performance?

The company has attributed the Q2 slump to a strategic shift in its distribution model under "Project Neev," which has led to inventory corrections. In a call with analysts, Varun Alagh, Chairman and CEO of Honasa Consumer Limited, said, "The impact of the sales returns and the inventory collection that has come through, which is higher than what we had imagined it to be. As we went into executing that, we clearly realised that there were pockets of sub-distributors or in-market creditors which we had not taken into account. Given these are now full and final parting exercises, the impact has turned out to be higher than what we had imagined."

Brokerages On Honasa Consumer

Following the disappointing Q2 performance by Honasa Consumer, brokerage firm Emkay Global has downgraded the stock from “Buy” to “Sell,” citing potential further weakness. It has also reduced the target price from ₹600 to ₹300 per share.

Citi Research has also downgraded the Mamaearth owner, giving a 'sell' recommendation on its shares, and Citi has also cut its target price on the stock to ₹300 per share.

The brokerage stated that despite strong performance from some of its new brands, the company is struggling to maintain its growth momentum.

Another brokerage house, Jefferies, has maintained its 'Buy' call on Mamaearth’s parent, but has reduced the target price to ₹425 per share.

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