Honasa Consumer Limited — Q1 FY26 earnings call

Call held 12 Aug 2025

Management summary

Honasa Consumer delivered its highest ever quarterly revenue and PAT in Q1 FY26, driven by 7.5% YoY revenue growth and significant margin expansion. The company's focus category strategy is yielding double-digit growth, and distribution infrastructure improvements are showing results. While competitive intensity and monsoon impact on sunscreen were noted, management remains optimistic about future growth and profitability.

Highlights

  • Achieved highest ever quarterly revenue and PAT in company history.

  • Reported 7.5% YoY and 11.6% sequential revenue growth.

  • EBITDA margin reached 7.7%, a sequential improvement of 260 basis points.

  • Gross margin expanded by 48 basis points.

  • Volume-led growth (UVG) stood at 10.5%, indicating healthy underlying demand.

Concerns

  • Early onset of monsoon impacted sunscreen category, leading to softness in June.

  • Competitive intensity in the beauty and personal care segment is high and increasing.

  • ESOP plan is expected to have some higher impact on opex.

Key financials

  1. Revenue Growth YoY 7.5% +7.5%YoY
  2. Revenue Growth QoQ 11.6% +11.6%QoQ
  3. Gross Margin Improvement 48 bps
  4. EBITDA Margin 7.7%
  5. EBITDA Margin Improvement QoQ 260 bps
  6. UVG (Volume Growth) 10.5%

What they filed

Q1 FY27: revenue up 19.2%, net profit up 110.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue417 505 523 584 527 +26%587 +16%608 +16%696 +19%
EBITDA-30 22 24 42 44 +247%61 +177%68 +183%100 +138%
Net profit-15 25 25 40 38 +353%48 +92%64 +156%84 +110%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Liquidity Liquidity disclosed The company has a healthy balance on its cash balance and continues to grow with negative working capital and a profitable profile. Management is looking at potential portfolio-additive acquisition opportunities and considering dividends as a strategy for cash utilization.
    Thanks for asking the question. Yes, we do have a healthy balance on our cash balance on the balance sheet and continues to grow with the negative working capital and profitable profile of the company. We continue to look at potential acquisition opportunities, which could be portfolio additive in nature in the areas which we feel are strong growth hypothesis areas for the category. I mean, we currently don't have anything which is in the stage that we can share with you. But that's a continuous exercise. We continue to do that. And we'll also look at figuring out younger opportunities that we can participate in the future to utilize this capital to drive growth from a long-term perspective. And outside of that, in the medium term, we'll also look at dividend as a strategy for cash utilization.

Guidance & targets

Revenue

  • Value Growth Revenue · rest of the year · Medium confidence good double-digit
    Yes. We do believe that for the remaining part of the year, we'll have good double-digit value growth.

    — Varun Alagh

Profitability

  • EBITDA Margin Profitability · rest of the year · High confidence 7%
    And from a profitability perspective, we should be in this zone of 7% for the rest of the year as well.

    — Varun Alagh

  • Profitability Improvement Profitability · 4 to 5 years · High confidence 100 to 150 basis points each year
    I mean exact math would be difficult to share, but like we have mentioned the attempt is to improve profitability by 100 to 150 basis points each year. So if you look at from a CAGR perspective, years might vary, some will be higher, some will be lower. But overall, that's the trend line that we'll follow in the coming 4 to 5 years.

    — Varun Alagh

  • EBITDA Range for Larger Brands Profitability · next 4 to 5-year view · Medium confidence mid-teen
    We do believe from a next 4 to 5-year view that some of our larger brands will surely be in the mid-teen kind of EBITDA range.

    — Varun Alagh

Ad Spend

  • A&P Spend as % of Revenue Ad Spend · next few years · High confidence 27%, 28%
    On the A&P trajectory, we believe over the majority of brands, this number should settle around 27%, 28% for brands, right, as they sort of grow over the next few years.

    — Varun Alagh

What to watch in Q2 FY26

Double-digit value growth

rest of the year
Current 7.5% YoY, 11.6% QoQ
Target Good double-digit value growth

Why it matters

To confirm the company's ability to sustain strong top-line momentum as guided.

Yes. We do believe that for the remaining part of the year, we'll have good double-digit value growth.

Risks & concerns

  • Impact of early monsoon on sunscreen category

    medium

    Early onset of monsoon led to softness in the sunscreen category in June, impacting overall growth.

    Management acknowledged

  • High and increasing competitive intensity

    medium

    Competitive intensity in the beauty and personal care market is high and continues to increase.

    Management acknowledged

  • Higher impact on opex due to ESOP plan

    low

    The ESOP plan is expected to lead to some higher impact on operating expenses.

    Management acknowledged

Q&A highlights

8 direct
Younger brands growth and competitive intensity Direct
I would agree with the fact that the size of this cohort has actually become large. It's actually more than 50% contribution now. So as a group, it's actually bigger than Mamaearth for us now, and which is where the base effect does come into play. But within that environment, a 20% plus continuous, sort of, growth will make sure that it is a share gain play that we continue to do. Competitive intensity, I would say, is high and has been increasing.

Analyst questioned the slowdown in younger brands' growth from 30%+ to 20%+ and competitive landscape; management acknowledged base effect, monsoon impact, and high competition while asserting continued share gain.

Asked by Dhiraj Mistry

Profitability of young brands and A&P spend Direct
Derma Co became profitable. Last year it became a single digit, now is a high single-digit level of profitability. Rest of the brands, of course, are still in invest zone and hence, are not profitable, expected to become profitable in next couple of fiscal years basically.

Clarified the profitability status of different younger brands, indicating Derma Co is profitable while others are still in investment phase, with a timeline for future profitability.

Asked by Dhiraj Mistry

Next phase of growth drivers and backup plan Direct
there are 7 focus categories that we have chosen, which have been carefully chosen, keeping in mind the kind of growth, right to win, gross margin profiles, et cetera, that we have seen for these categories. And these are the categories in which our ambition is to, over time, become market leaders as a company.

Management outlined its core strategy of focusing on 7 carefully chosen categories and winning across distribution channels (online/offline) through data-based investments.

Asked by Sucrit Patil

Performance of specific younger brands (Aqualogica, Dr. Sheth, BBlunt, Staze) Direct
the brands which have much higher sunscreen reliance like Dr. Sheth's and Aqualogica were relatively behind plan, but we are very confident that over the year. They will catch up to their plans and the balanced brands actually do ahead of plan.

Provided a granular view on younger brand performance, attributing underperformance in some to sunscreen impact, while others are performing ahead of plan.

Asked by Mehul Desai

Sustainability of A&P expenses for mature brands Direct
On the A&P trajectory, we believe over the majority of brands, this number should settle around 27%, 28% for brands, right, as they sort of grow over the next few years.

Gave specific guidance on the expected A&P spend as a percentage of revenue for mature brands, indicating a stable range for the coming years.

Asked by Pratik

Utilization of cash balance and M&A strategy Direct
We continue to look at potential acquisition opportunities, which could be portfolio additive in nature in the areas which we feel are strong growth hypothesis areas for the category. And outside of that, in the medium term, we'll also look at dividend as a strategy for cash utilization.

Clarified the company's capital allocation priorities for its healthy cash balance, focusing on strategic acquisitions and potential dividends.

Asked by Aditi Parmar

Long-term profitability improvement guidance (100-150 bps annually) Direct
I mean exact math would be difficult to share, but like we have mentioned the attempt is to improve profitability by 100 to 150 basis points each year. So if you look at from a CAGR perspective, years might vary, some will be higher, some will be lower. But overall, that's the trend line that we'll follow in the coming 4 to 5 years.

Reiterated the long-term commitment to annual profitability improvement, providing a clear directional target for investors.

Asked by Mehul Desai

Project Neev update and distributor stability Direct
The direct distribution metrics, like I said, has are 50% up and our inventory levels are very well under control now, less than 30 days on our direct distributors. We have zero overdues in terms of credit and a very healthy credit profile also.

Provided concrete metrics on the success of Project Neev, highlighting significant improvements in direct distribution, inventory management, and credit health.

Asked by Vismaya Agarwal

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Honasa Consumer reported its highest ever quarterly revenue and PAT in Q1 FY26. The company achieved a 7.5% year-on-year growth and 11.6% sequential growth in revenue. Gross margin improved by 48 basis points, and EBITDA stood at 7.7%, marking a sequential improvement of 260 basis points. Volume-led growth (UVG) was strong at 10.5%, outpacing value growth by 300 basis points, indicating healthy underlying demand.

Category Focus and Strategic Shift

The company's strategy of focusing on specific categories is yielding positive results, with focus categories now contributing approximately 80% of revenues and growing in double digits. This strategic shift is evident across both online and offline channels. Management highlighted that this growth is competitive, with Nielsen shares in offline and e-commerce showing year-on-year and sequential growth, respectively.

Brand Performance and Innovation

Mamaearth continues to be a strong focus area, with interventions implemented since February showing green shoots. The Derma Co is on track to become the next INR 1,000 crores brand, with acne as a partition growing over 100% and reaching an INR 100 crores run rate. Innovation remains a strong pillar, with new product entries in hair care (peptide-stem cell technology) and anti-pollution factor technology (APF) in Aqualogica, providing 80% protection from external pollutants.

Distribution and Infrastructure Improvements

The company's efforts on strengthening GT distribution are paying off, with direct outlet reach increasing by 50% and Nielsen showing a 20% growth in distribution numbers. Modern trade offtakes are also healthy. Project Neev has resulted in direct distribution metrics being up 50%, inventory levels under 30 days, and zero overdues in credit, indicating a healthy credit profile.

Capital Allocation and M&A Outlook

Honasa maintains a healthy cash balance and continues to generate cash with negative working capital. The company is actively exploring potential acquisition opportunities that are portfolio-additive and align with strong growth hypotheses. Additionally, management indicated that dividends would be considered as a strategy for cash utilization in the medium term.

Regional Market Focus

While performance across regions shows no significant differential, the company identifies the South market as an internal focus area. Being a North-based company, Honasa aims to improve vernacular communications and insights to better serve and penetrate the South markets, ensuring its shares are fairly indexed across all regions.

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