Honasa shares rise 13% despite decline in Q4 net profit

India Today

23-05-2025

Shares of Honasa Consumer, the parent company of personal care brand Mamaearth, rose by 13% in early trade on Friday. The stock touched the day's high of Rs 314.20 on the BSE after the company reported a rise in its revenue from operations for the fourth quarter of the financial year 2024-25.The company's revenue from operations went up by 13% year-on-year (YoY), reaching Rs 534 crore in Q4FY25. In the same quarter last year, Honasa had reported revenue of Rs 471 crore.However, despite the rise in revenue, Honasa's consolidated net profit fell by 18% YoY. The net profit stood at Rs 25 crore in Q4FY25, down from Rs 30 crore in the same period of the previous year.During the quarter ended September 30, 2024, Honasa made major changes in how it sells products as part of its strategy called Project 'Neev'. The company switched to a direct distribution model in the top 50 cities. This meant removing the layer of super stockists and replacing some distributors with Tier 1 distributors. The aim was to improve service to retail shops.Due to this change, Honasa made a sales return provision of Rs 63.51 crore and recorded inventory and right-to-return assets worth Rs 11.44 crore in that quarter.By the end of March 31, 2025, this provision had come down sharply to Rs 5.20 crore. The related inventory and return assets also dropped to zero, from Rs 1.09 crore at the end of December 2024, according to a company filing.STRONGER OPERATIONS AND EXPANSIONThe company said its business is growing in a healthy manner. In Q4FY25, the EBITDA (earnings before interest, tax, depreciation and amortisation) stood at 5.1%, which shows stronger operational performance.The gross profit margin also improved, reaching 70.7% in Q4FY25, up by 76 basis points YoY. This improvement was due to better product mix and higher efficiency in operations.Mamaearth's change in business strategy seems to be working well, the company said. It reported double-digit YoY growth in important product categories on e-commerce platforms and in modern trade channels during Q4FY25.The company also increased its retail presence. It expanded its retail distribution by 26% YoY to 2.36 lakh outlets. The younger brands under Honasa continued their strong growth, with over 30% YoY rise in FY25.PERFORMANCE OF OTHER BRANDSThe company's other brand, The Derma Co., reached an annual revenue run rate (ARR) of Rs 100 crore in offline sales. This shows growing popularity and sales strength of its newer brands.The company's direct distribution strategy has helped increase its market reach. In FY25, more than 1 lakh unique retail outlets were billed under this model. The share of sales coming from direct distributors also rose sharply from 38% in FY24 to 71% in Q4FY25.
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