Honasa Consumer Limited (HCL), parent company of brands like Mamaearth and Aqualogica, reported a strong Q3 FY25 with Rs 517 crore in revenue, reflecting a 5.9% YoY increase. Despite margin contraction, the company returned to profitability with a net profit of Rs 26 crore, maintaining the same level as Q3 FY24. HCL’s focus on offline distribution, retail penetration, and evolving marketing strategies contributed to growth, especially in emerging brands, which saw 30% YoY growth. However, Mamaearth faced challenges due to higher marketing expenses, impacting margins. Honasa remains optimistic about future growth, particularly in face wash, shampoo, and moisturizers. Its restructuring efforts through ‘Project Neev’ are expected to drive long-term growth, though with potential short-term financial impacts.
Background and Overview of Honasa Consumer (HCL)
Honasa Consumer Limited (HCL), the parent company of well-established beauty and personal care brands like Mamaearth, Aqualogica, The Derma Co., and Dr. Sheth’s, has become one of the most significant players in India’s rapidly growing beauty and personal care market. Established with a vision to provide high-quality, environmentally-conscious, and effective products, Honasa has successfully carved out a niche in the direct-to-consumer (D2C) space and continues to thrive on the back of strong consumer demand for natural and sustainable products.
Founders and Leadership
Honasa was founded by Varun Alagh and Ghazal Alagh, both of whom have been instrumental in the company’s growth trajectory. Varun, a former HUL executive, and Ghazal, a former lawyer, combined their expertise to create a business model that relies heavily on digital-first strategies and direct-to-consumer sales. Their leadership has been key in driving Honasa’s expansion, with a particular focus on sustainable and eco-friendly beauty products, positioning their brands as natural, clean, and socially responsible.
Business Model and Revenue Model
Honasa follows a primarily D2C business model, with its revenue being generated from the sale of beauty, personal care, and baby care products across skin, hair, and baby care categories. The company has leveraged a combination of online channels, including its website and e-commerce platforms, alongside physical retail presence to drive sales. The growth of its D2C platform has been significant, contributing nearly 40% to total sales as of 2024. Honasa also generates significant revenue from offline retail through the expansion of its brands into over 2.16 lakh FMCG outlets across India. This omni-channel approach has proven effective, with offline retail gaining momentum through ‘Project Neev,’ the company’s initiative to strengthen its distribution network in India’s top 50 cities.
Honasa Consumer’s Q3 FY25 Financial Performance
Honasa’s Q3 FY25 performance reflects a mix of growth, strategic transitions, and operational challenges. For Q3 FY25, Honasa reported a revenue of Rs 517 crore, up 5.9% from Rs 488 crore in Q3 FY24. Honasa Consumer Limited drove the revenue increase through the continued popularity of its flagship brand, Mamaearth, which achieved strong year-on-year growth in both its distribution network and consumer penetration. Additionally, Honasa’s emerging brands—The Derma Co., Aqualogica, BBlunt, and Dr. Sheth’s—performed exceptionally well, collectively contributing to over 30% YoY growth. Honasa returned to profitability with a net profit of Rs 26 crore in Q3 FY25, matching the profit posted in Q3 FY24. This marked a significant recovery from the Rs 19 crore loss in Q2 FY25. Notably, Q1 FY25 had seen record profits of Rs 40 crore, showcasing the company’s volatile yet promising growth trajectory.
EBITDA and Margins
Honasa’s EBITDA for Q3 FY25 stood at Rs 26 crore, which was a 23.53% decline compared to Rs 34 crore in Q3 FY24. This was largely due to an increase in marketing expenses, which put pressure on profitability and resulted in a margin contraction. The EBITDA margin stood at 5%, a sharp decline from 7.1% in the same quarter last year. Despite these challenges, the company’s gross margin improved by 200 basis points to 72%, a result of better sourcing practices and optimized advertising spend. Honasa’s shift in marketing strategy, which included reducing digital ad dependency by 15% and focusing more on influencer marketing and traditional media, reflects its commitment to long-term sustainability.
Strategic Initiatives and Project Neev
A significant focus for Honasa over the past few quarters has been its strategic initiative ‘Project Neev,’ designed to strengthen the company’s offline distribution capabilities. Under this initiative, Honasa moved from a reliance on super stockists to a more direct distribution model, focusing on the top 50 cities in India. This change has significantly increased market coverage and enabled the company to improve its retail footprint. Mamaearth, for example, expanded its reach to over 2.16 lakh FMCG outlets by December 2024, marking a 22% year-on-year increase in retail outlets. While this transition had a temporary negative impact on the company’s financials due to unsold inventory and restructuring costs, Honasa expects these changes to drive stronger long-term growth. The move aligns with the company’s goal of increasing market share and expanding its presence in both Tier 1 and Tier 2 cities.
Mamaearth’s Performance and Market Trends
Mamaearth, Honasa’s flagship brand, continues to dominate in terms of both online and offline sales.The brand has significantly increased its market share and household penetration, earning recognition as the top player in online channels and the No. 3 brand in offline face wash sales, according to Kantar’s Brand Health Track. Despite its success, Mamaearth’s performance in Q3 FY25 faced some headwinds due to higher marketing costs and channel mix issues. The brand’s face wash segment gained 114 basis points in value market share, while its shampoo category expanded by 20 basis points year-on-year. However, Mamaearth’s challenges in maintaining its high EBITDA margins suggest that the brand is currently undergoing a strategic transition. Nevertheless, this transition is expected to be resolved in the coming quarters.
Future Outlook and Market Expectations
Honasa’s outlook remains positive despite the short-term financial challenges. The company expects its key categories, such as face wash, shampoo, serums, moisturizers, sun care, and baby care, to continue their strong growth trajectory. Honasa projects substantial growth in the moisturizer segment as consumers increasingly adopt skincare products such as sunscreen, toners, and lightweight moisturizers. The company anticipates significant expansion in the overall skincare market, expecting it to grow from Rs 3,172 crore in 2024 to about Rs. 5,962 crore by 2027. The company plans to capitalize on these trends by expanding its product offerings and increasing its market share in the skincare segment.
Stock Performance and Market Reaction
Honasa’s stock has been volatile since its initial public offering (IPO) in November 2023. After reaching a peak of Rs 340 per share shortly after its debut, the stock saw a significant decline, hitting a 52-week low of Rs 197.15 on February 12, 2025. Despite this, shares surged by nearly 9% to Rs 222 per share in early trading following the release of the company’s Q3 results, which slightly exceeded market expectations. Analysts are divided on the future of the stock. Some, like ICICI Securities, view the stock as an opportunity for long-term investors, especially given the company’s ongoing distribution revamps and its strong D2C presence. Others, like JM Financial, have revised their target prices downward but maintain a positive outlook due to the company’s strategic moves.
Learnings for Startups and Entrepreneurs
Honasa’s transition from super stockists to direct distributors under ‘Project Neev’ emphasizes the power of efficient, scalable distribution models, despite short-term challenges. By tapping into trends like digital-first channels, influencer marketing, and the demand for eco-conscious, natural products, Honasa has successfully carved out a niche in a competitive market. Their ability to balance rapid growth with cost control—evident in reduced digital ad spending and increased gross margins—highlights the importance of profitability alongside expansion for startups.
About The Startups News
At The Startups News, we pride ourselves on providing the latest updates on emerging startups, funding announcements, and industry trends. As a platform focused on the Indian startup ecosystem, we strive to bring entrepreneurs the latest insights into market dynamics and the strategies of successful companies. If you are an entrepreneur or startup enthusiast, The Startups News is your go-to source for understanding the challenges, opportunities, and innovations that are shaping the future of business in India.