The beauty and personal care sector in India is witnessing robust growth, driven by rising disposable incomes, urbanization, and increasing consumer awareness about self-care. Valued at approximately $18 billion in 2023-24, the sector is expected to grow at a CAGR of 10% in the coming years. Key growth drivers include the demand for natural, organic, and gender-neutral products, alongside the expansion of e-commerce platforms. 

Several new players like Sugar Cosmetics, Mamaearth (Honasa), and MyGlamm have disrupted the market with innovative offerings and digital-first approaches. These companies focus on sustainability and cater to millennials and Gen Z consumers. The sector’s growth is further bolstered by government initiatives promoting local manufacturing under the “Make in India” campaign. 

Increase of Stake by Promoters 

Varun Alagh, Co-founder and CEO of Honasa Consumer, the parent company of Mamaearth, has increased his stake in the company. Previously holding a 31.88% stake at the end of the September 2024 quarter, Varun acquired additional shares worth ₹4.5 crore, raising his stake to 31.93%. His wife and Co-founder, Ghazal Alagh, holds 99,64,700 shares, amounting to a 3.07% stake in the company. 

This move underscores the founders’ confidence in Honasa Consumer, a leader in the beauty and personal care segment. The increased ownership highlights their commitment to the company’s growth and its innovative, sustainable product offerings in the competitive market. 

Drop in Share Price and its Reason 

Honasa Consumer, the parent company of Mamaearth, has experienced significant share price pressure, dropping 27-28% in the past month despite a recent rally. The decline stems from disappointing Q2 results, which reported a net loss of ₹15 crore compared to a ₹38 crore profit in the same quarter last year. Revenue also dipped year-over-year from ₹460 crore to ₹416 crore, but the major concern was the operating profit margin, which turned negative at -7%, down from +10% YoY. 

This financial underperformance caused the stock to plummet from ₹547 to a low of ₹222. While the stock has since recovered slightly, trading at ₹278, growth and profitability concerns remain a significant challenge for the company. 

Share Price 

Honasa Consumer’s share price opened at ₹271.05 on the BSE, marking a 3.5% increase from the previous close of ₹261.70. The stock surged further to reach an intraday high of ₹287.85, a gain of 10%, hitting the upper price band and locking in the upper circuit. However, the momentum cooled later in the session, and the share price eventually closed at ₹278.35. This performance highlights a strong intraday rally despite recent pressures, reflecting some recovery optimism among investors.

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Analyst Targets (Jefferies India) 

Following the declaration of Honasa Consumer’s Q2 results, Jefferies analysts also expressed disappointment over higher inventory corrections and the reported loss. They noted that comments from the founders about “reworking the playbook” created additional uncertainty, leading to expectations of continued pressure on the stock. 

However, Jefferies maintained trust in the founders’ ability to steer the company back on track, acknowledging that such challenges are not uncommon for startups. Despite the short-term concerns, the brokerage remained optimistic about the company’s potential, assigning a target price of ₹425 for the stock, indicating a significant upside from its current levels. 

About the Company 

Incorporated in 2016, Honasa Consumer Limited (HCL) is a leading provider of beauty and personal care (BPC) products through its digital platform. Known for its flagship brand Mamaearth, HCL has emerged as India’s largest digital-first BPC company by revenue in FY24. As of 2023, Mamaearth holds the position of the third-largest skincare brand in India, according to Euromonitor. 

Honasa Consumer’s innovative product offerings and commitment to sustainability have positioned it as a key player in the rapidly growing BPC market. The company continues to expand its portfolio, catering to diverse consumer needs with a focus on quality and digital engagement. 

Conclusion 

The recent surge in Honasa Consumer’s share price, despite the company’s recent financial underperformance, highlights the market’s continued confidence in the company’s growth potential. The increased stake by the co-founders underscores their commitment to the business and its long-term success.

While Honasa Consumer faces challenges in maintaining profitability, the company’s innovative product offerings, digital-first approach, and focus on sustainability position it well to navigate the evolving beauty and personal care market in India. 

Written By: Dipangshu Kundu 

Disclaimer

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