Mamaearth parent loses $415 million in market value as Q2 loss fans demand worries

Indian skincare firm Mamaearth’s parent Honasa Consumer 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 and Nestle India 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 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, opens new tab 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.