Explained: Why Honasa Consumer share price crashed 20% today

Honasa Consumer share price: The sharp drop came after Mamaearth's parent company released its Q2FY25 earnings report, which revealed weaker-than-expected performance.

In Short

• Honasa Consumer shares crash 20%, hitting Rs 297.25 lower circuit
• Reports first quarterly loss in five quarters at Rs 19 crore
• Revenue drops 7% YoY; expenses surge 9% to Rs 506 crore

Honasa Consumer shares crashed by 20% on November 18, hitting the lower circuit at Rs 297.25 on the National Stock Exchange (NSE).

The sharp drop came after Mamaearth's parent company released its Q2FY25 earnings report, which revealed weaker-than-expected performance, marking its first quarterly loss in five quarters.

The company reported a loss of Rs 19 crore for the July-September quarter, a significant reversal from a profit of Rs 29 crore in the same period last year. Revenue declined 7% year-on-year to Rs 462 crore, while total expenses surged 9% YoY to Rs 506 crore.

Analysts attribute the company’s struggles to its ongoing transition to a direct-to-consumer (D2C) model under Project ‘Neev,’ which has caused disruptions in its inventory management.

MULTIPLE BROKERAGES DOWNGRADE STOCK

Brokerages reacted swiftly to the disappointing results. Emkay Global downgraded Honasa Consumer to a ‘sell’ from its earlier ‘buy’ recommendation, cutting the target price to Rs 300 from Rs 600.

“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 a decline in FY25 and aims to recover base in FY26,” the brokerage noted.

Jefferies, however, maintained a ‘buy’ rating, albeit with a reduced target price of Rs 425 per share.

Highlighting the challenges posed by inventory corrections, Jefferies said, “The naysayers saw it coming while the supporters are disappointed. 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.”

The sell-off also dragged the stock below its IPO price of Rs 324, further eroding investor confidence. With liquidity concerns adding to the pressure, analysts expect the stock to remain under strain in the near term.

For Honasa Consumer, a potential recovery hinges on stabilising operations and successfully navigating the challenges of its evolving business model.