India's Mamaearth parent loses $415 mln in market value as Q2 loss fans demand worries

Honasa Consumer

19/11/2024 07:39

By Kashish Tandon and Indranil Sarkar
       Nov 19 (Reuters) - Indian skincare firm Mamaearth's
parent Honasa Consumer  HONA.NS  wiped off nearly 35 billion
rupees ($414.7 million) in market valuation in two sessions,
after a second-quarter loss fanned demand concerns for the
beauty products retailer.
    The stock touched a record low of 242.35 rupees on Tuesday,
and has fallen by about 30% over the last two days. Its market
cap has declined to 86 billion rupees.
    The sharp selloff was triggered after Honasa posted its
first quarterly loss since listing in Nov. 2023 late on
Thursday.
    It joined a long list of Indian consumer firms such as
Hindustan Unilever  HLL.NS  and Nestle India  NEST.NS  to report
downbeat results this quarter as urban consumers cut spending in
the face of high inflation.
    A challenging demand scenario and weaker-than-expected
performance has hurt the company, analysts at JM Financial said.
        Analysts said that Honasa, which competes with larger
rival Nykaa  FSNE.NS  and private players such as Health & Glow,
was hurt by stiff competition in India's beauty and personal
care industry, whose market size is likely to hit $28 billion by
2025 from $17.8 billion in 2020, per Avendus data.
    The competition has forced the company, also known for its
brands such as 'The Derma Co' and 'Aqualogica,' to rethink its
business strategy, said Arvind Singhal, chairman of consultancy
firm Technopak Advisors.
    Honasa, which sells its products primarily through online
platforms, had said in its post-earnings call that it is
planning to scale up its business by shifting its focus more on
offline channels.
        Analysts at Citi said the move "needs a refresher", and
downgraded the stock by two notches to a "sell" from "buy".
    The brokerage also cited consumers' shift to more active
ingredient-based products from naturals-based products earlier.
    At least five analysts downgraded the stock after its
results, while nine slashed their price targets, per data
compiled by LSEG.
    
($1 = 84.4000 Indian rupees)

 (Reporting by Kashish Tandon and Indranil Sarkar in Bengaluru;
Editing by Varun H K)
 ((Kashish.Tandon@thomsonreuters.com; 8800437922;))