Co-founder and CEO Varun Alagh told analysts on February 9 that while demand may slow down in the near term, Honasa Consumer—the parent business of digital-first skincare company Mamaearth—will outperform its competitors over the next three years.
Alagh’s remarks coincide with the company’s announcement in Q3FY24 of a 250 percent year-over-year (YoY) increase in net profit to Rs 26.1 crore. In the same period, Honasa reported a 28 percent gain in operational revenue to Rs 488.2 crore.
“We’ll be at a 2-2.5X of where market growth would be in the long-term. In the very near term, we expect a consumption slowdown, we are already seeing some of that. The slowdown is happening in urban areas as well, not just in rural areas,” Alagh said.
“In the long-term, which is around three years from now, we’ll look at growing at about a 20 percent compound annual growth rate (CAGR) which is where we see the market shaping up as well.”
Although year-over-year (YoY) growth was achieved by the company, sequential declines in profit and revenue of 12% and 12%, respectively, corroborated Alagh’s remarks regarding the present industry slowdown in the short term.
Approximately one-third of Honasa’s total revenue originates from offline channels, with the remaining portion coming from internet sources. Particularly for Mamaearth, the largest and most significant brand for Honasa, the distribution is almost 50:50, according to Alagh.
“For online growth, a bulk of it is from Mamaearth’s online growth where we’ve seen that for Mamaearth, the growth is coming more from platforms that have a stronger Tier 2 and beyond presence like Meesho, Purplle, and Flipkart – that’s been a learning in the last few months,” Alagh mentioned during the call.
Honasa has grown its younger brands, as evidenced by the fact that four of its six portfolio brands are in the Rs 150 crore ARR club. Derma.co has established a positive EBITDA position for the entire year, whilst Colorcare reported sales of more than 10 lakh units for the relevant quarter.
“For younger brands, we’ve seen the growth being driven more from platforms like Nykaa, Amazon, and others. On a company level, we’re gaining share on each of those platforms.”
