Honasa Consumer

Honasa Consumer's non-Mamaearth brands demonstrated solid growth, expanding by over 30% year-to-date. These younger brands now contribute more than 40% of the company's total revenue, up from 35% last year. Quick commerce has emerged as the fastest-growing channel, increasing its contribution to the business from 4-5% to 7-8% this quarter, with the company aiming for its quick commerce market share to surpass its e-commerce market share.

The flagship Mamaearth brand continued to experience a decline in Q3 FY25, similar to its performance in the first half of the fiscal year. Management has initiated significant internal transitions focused on product, messaging, and media mix, with pre-work completed over the last 90 days. Pilots for these new strategies have recently commenced in Q4 FY25, and the company expects to gain structured learnings and see the brand return to growth levels after Q4 FY25 and Q1 FY26.

The company is actively scaling up its new distribution system, having completed over 85% of the inventory correction in the distribution channel in the previous quarter. In the last 6-7 months, over 150 Tier 1 distributors have been appointed in the top 50 cities, with over 80% being new partners. Distributor days have reduced to a range of 30-40 days, indicating improved inventory rotation. The full effect of this distribution transition is expected to materialize over the next couple of quarters, leading to a recovery in the general trade system.

Gross margins expanded this quarter, primarily driven by a favorable brand mix as faster-growing younger brands, particularly in the skincare category, carry better gross margins. The company reported an EBITDA margin of 5% for the quarter. While Q4 FY25 is expected to see higher and more aggressive A&P spends due to experimentation, margins are projected to normalize from Q1 FY26. Management aims to return to FY24 EBITDA margin levels by FY26 and achieve double-digit margins with over INR 4,000 crores in revenue by the end of the decade.

Honasa Consumer remains predominantly an urban-focused business, with over 80% of its sales originating from the top 100-200 cities. While acknowledging a general slowdown in urban markets, management emphasized that internal transitions and share gain are their primary focus, rather than attributing performance solely to external demand. The company does not have significant exposure to rural markets and therefore cannot comment on rural sales trends or demand from deep pin codes.