Mamaearth shares fall 4% after surging 43% in 5 sessions; here’s why

Snapping two sessions gaining streak, shares of Mamaearth parent Honasa Consumer dropped over 4% in opening trade on Tuesday. The stock price tumbled after the exchanges lowered the daily circuit limit for Honasa from 20% to 10% in the backdrop of recent sharp movement in the share price. The shares of the beauty and personal care (BPC) company rose 43% in the last five sessions, touching their 20% upper circuit in intraday in the previous two sessions, as investors cheered its robust September quarter earnings report.

Honasa shares opened lower at ₹469.85, down 1.1% against the previous closing price of ₹475.10 on the BSE. In the first hour of trade so far, the stock declined as much as 4.5% to ₹453.70, while the market capitalisation slipped to ₹14,780 crore.

Honasa Consumer, the owner of skincare brands Mamaearth, The Derma Co., Aqualogica, Ayuga, BBlunt and Dr. Sheth’s, made its market debut on the stock exchanges on November 7, 2023. The stock had a quite start at bourses initially but gained momentum in the last one week, hitting its record high of ₹487 on November 24, 2023. The counter touched its record low of ₹256.10 on November 10, 2023.  

At the current price level, shares of Honasa, co-founded by the husband-wife duo of Varun and Ghazal Alagh, trade 40% higher than its IPO issue price of ₹324 apiece.

Last Friday, the stock hit a new high after global brokerage Jefferies added Honasa Consumer, along with some other companies including Eicher Motors, NTPC, HDFC Bank, and Coal India, to its India portfolio. The brokerage in its report said that Honasa's revenue growth and expanding margins play well with India's India strategy.

Jefferies added Honasa to its portfolio after the company reported a 93% year-on-year growth in its net profit at ₹29.4 crore in the July-September period of the current fiscal, the first quarter since its listing on the exchanges. The revenue from operations surged 21% to ₹496 crore against ₹410 crore recorded in the same quarter last year, driven by strong volume.

Mamaearth CEO and chairman Varun Alagh says the company's business has grown by 33% YoY in H1 FY24, which is 3.8 times the median growth of FMCG companies in India. "Mamaearth, our largest brand has entered the Top 15 BPC brands in India...Our profits grew much faster than our revenues, with H1 PAT growing by 1,377% to ₹54 crore. Dr Sheths has become the 4th brand from Honasa portfolio to enter the ₹150 crore Club after Aqualogica and Derma Co," says Alagh.

For the first half of fiscal 2024 (H1 FY24), the digital-first beauty and personal care company delivered ₹961 crore in revenue from operations, growing 33% YoY, driven by volume growth of 35% YoY. It achieved an EBITDA of ₹70 crore and PAT came out to be at ₹54 crore. 

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