Mamaearth Q3: Expect slowdown in short-term but will grow ahead of industry in long-term, says CEO Varun Alagh

Varun Alagh, co-founder and CEO of Mamaearth

Honasa Consumer, the parent company of digital-first skincare firm Mamaearth, will see demand slowing down in the short-term, in line with industry peers, but over the three-year horizon, it will beat the competition, co-founder and CEO Varun Alagh told analysts on February 9.

Alagh’s comments come at a time when the company has posted a 250 percent year-on-year (YoY) rise in net profit at Rs 26.1 crore in Q3FY24, during the same period Honasa saw its operating revenue increase 28 percent 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 told analysts after announcing the company’s results.

“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.”

While the company grew on a year-on-year (YoY) basis, its revenue was down 2 percent and profit fell 12 percent sequentially, confirming Alagh’s comments on the current industry-wide slowdown in the near term.

Not just Mamaearth, competitors like Hindustan Unilever Limited (HUL), which is a significantly larger company but operates in the same space, also saw a slowdown, against analysts’ expectations. HUL’s net profit remained flat at Rs 2,519 crore in Q3FY24 while its revenue fell marginally during the said quarter.

Amid the slowdown, Alagh said that the online business is growing faster than offline channels. Overall, about one-third of Honasa’s business comes from offline channels while the remaining comes from online. Specifically for Mamaearth – which is Honasa’s biggest and most important brand – the split is nearly 50:50, Alagh said.

“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 said during the call.

Four out of six brands from Honasa’s portfolios are in the Rs 150 crore ARR club, underscoring growth in its younger brands. While Colorcare reported sales of over 10 lakh units in the said quarter, Derma.co achieved EBITDA positive status year-to-date.

Meanwhile, Aqualogica, Dr. Sheth’s, and BBlunt saw significant successes in their respective categories, the company said.

“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.”