Honasa Consumer stock plunges 20% as firm reports first loss in five quarters; shares below IPO price

In the July-September period, Honasa Consumer incurred a loss of Rs 19 crore, versus a profit after tax of Rs 29 crore reported in the year-ago period.

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Honasa Consumer shares hit its 20 percent lower circuit in the morning session on November 18 after the parent company of D2C brand Mamaearth shared a weak earnings report for the quarter ended September, reporting its first quarterly loss in five quarters.

At 9.20 am, Honasa Consumer shares tumbled 20 percent to its lower circuit of Rs 297.25 on the NSE. Shares of Honasa Cosumer fell below their IPO price of Rs 324 per share, following the fall.

In the July-September period, Honasa Consumer incurred a loss of Rs 19 crore, versus a profit after tax of Rs 29 crore reported in the year-ago period, and also saw its revenue decline 7 percent from Rs 496 crore to Rs 462 crore on a year-on-year. The total expenses surged 9 percent YoY but were down sequentially at Rs 506 crore.

The downturn has been attributed to the company’s ongoing transition to a direct-to-consumer (D2C) distribution model as part of its Project 'Neev', which has necessitated inventory corrections.

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Emkay Global said it downgraded Honasa Consumer shares to 'sell', from 'buy' earlier, cutting the target price to Rs 300 apiece, from Rs 600 earlier. "Our thesis of accelerated growth with steady share gains in personal care got a beating from weak business commentary in Q2FY25. Mamaearth is likely to see decline in FY25E and aims to recover base in FY26E," said the brokerage.

On the other hand, Jefferies maintained its 'buy' call on the Mamaearth parent, while cutting its target price to Rs 425 per share. The higher inventory correction and loss in Q2 was disappointing, said Jefferies, adding, "Give the extreme investor views here, the naysayers saw it coming while the supporters are disappointed."

The stock is likely to be under pressure and holders looking to exit might feel stuck, given the low liquidity. "We are disappointed too, but trust the founders to get it back on track. Honasa Consumer is not the only start-up to go through pain," Jefferies further said.

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