Good evening, everybody. Welcome to the 3Q FY26 earning conference call of Honasa Consumer Limited.

Today on call, we have Mr. Varun Alagh, Co-Founder, Chairman & Chief Executive Officer; Ms.

Ghazal Alagh, Co-Founder and Chief Innovation Officer; and Mr. Ramanpreet Sohi, Chief Financial Officer.

I now hand over the call to Mr. Varun for his opening remarks.

Over to you, sir.

Hi, thank you so much, and thanks everyone for joining. Welcome to the Q3 FY26 update for Honasa Consumer Private Limited.

As is customary, we will start by sharing a key trend that we have been witnessing in the beauty and personal care industry, which is the trend in men's skincare, you know. We believe men's skincare is at an inflection, driven by evolving consumer preferences, you know.

Men's grooming has been talked about for quite a long time, but we saw at least in the last decade largely action on the shaving or beard care side, you know. Last two years, we've specifically been noticing, a strong you know inclination towards skincare which is specifically designed for men.

We've seen this specifically in the search data that we track, you know. Like in sunscreen category, consumers are specifically searching for sunscreen for men, in our face cleanser category they're searching for face wash for men, you know.

This "for men" call-out has been increasing multifold over the last two to three years, you know. We've also seen significant increase in male skincare influencers, almost 6x in the last five years, you know.

All of this is happening because of rapid premiumization, awareness, evolving self-care mindset, you know. This is made us feel that this is an interesting space which will get shaped and will grow really well, and this is also space where Honasa has made an acquisition that we will talk about during the course of the presentation, which is Reginald Men, you know.

Over to this quarter's financial snapshot, you know. I'm delighted to share that, we have delivered our highest-ever quarterly revenue.

The company has grown by 21.7% in terms of revenue growth, you know. This is also led by volume.

Our UVG is at 20% growth, you know. It's our highest-ever EBITDA, which has also sequentially grown.

We've almost doubled our PAT, which is again our highest-ever PAT, and we continue to be negative on our working capital cycle, you know. The core engines that we have been talking about for the last three quarters, the flywheel around making our core stronger, which is Mamaearth, that's back into teens YoY growth, and continuing strength of our young brands, which are now growing at 25% plus in terms of growth, has led to us delivering this this you know competitive market-beating growth for us, you know.

Also in line with the scale as well as the effectiveness coming in our marketing, we've consistently seen improving EBITDA margin trajectory for the company, which we have been talking about and have been able to deliver, you know. If we sort of again call out, we had mentioned this in the last quarterly meeting as well that there is a revenue recognition impact, which has happened on account of Flipkart Group changing their's revenue recognition norms, because of which there is a ₹28 crore impact that we are seeing, but if you also correct for basis, then the growth continues to be at a 21% level, and like-to-like adjusted it's 21.7%, you know.

If you were to see hence reported numbers, we have delivered ₹602 crore in terms of reported revenue. EBITDA is at 10.9%, the same ₹66 crore, you know.

This revenue recognition impact has not led to any impact on bottom lines, you know. It's just a recognition impact that we see in our revenues, you know.

Double-clicking on the business, I think from a channel perspective, what is heartening to see now is that all the channels, are actually doing quite well, you know. E-commerce is at a 20% plus growth, modern trade and GT now, is also delivering 25% plus growth, you know.

These are offtake growths and secondary growths, which is a great sign of the brand traction, you know. Our strategy of focusing on our focus categories has also clearly paid off.

Our focus categories continue to grow ahead of the company uh's overall growth numbers at 25% plus, you know. These are the categories which are getting 90% plus of our investments, and we continue to focus on strengthening our share in these categories, you know.

Mamaearth, which is back to teens growth, it's been it's taken some time, but focus on fundamentals, has really helped us deliver this, you know. Started with superior market-beating formulations.

We've consistently been talking about how we've been increasing and improving our formulations to deliver blind test winning formulations across our products, you know. We've also worked a lot on our communications to make them more aspirational to the new Gen Z consumer, you know.

We have focused our investments in the six focus categories that we've identified for Mamaearth, you know. Combination of this is that we're now back to double-digit growths, and we are winning in our value share as well as share among standers, you know.

Share among standers actually has you know moved ahead of our value share, which means that now we have more catch-up job to do on our distribution front, and if you do that that'll give further growth in the offline ecosystem as well. As we do that, we're also building other categories like moisturizers, in offline, you know.

Our young brands, of course, continue to, sustain their momentum, you know. BBLUNT with focus on hair color, Aqualogica with moisturizers and mist being new categories, Dr.

Sheth's with premium serums which we are shaping, The Derma Co which has now crossed ₹50 crore ARR, and continues to grow well, and of course you know the the star in this portfolio continues to be Derma Co, which is continuing to not only deliver strong growths, but has also achieved a double-digit EBITDA profile now in the spot of, and continues to drive innovation across categories where we have entered hair care with peptides and triple actives, you know. Our sunscreen formulations have become even better, with new-generation filters like Tinosorb and Uvinul, you know.

Consumer interest, of course, continues to be strong in our core categories, which is demonstrated with the searches and the share gain that we're seeing on the brand, you know. Continued successful momentum on Derma Co, you know.

Another area of focus in the last four quarters, of course, has been offline execution, where clearly our shift to direct distribution has started to pay off strongly, you know. Our outlet reach has expanded, you know.

Our direct distribution contribution has expanded to almost 80% revenue contribution now. Our weighted distributions are healthy, and our inventory holding days are now optimized at about 30 days, which is fairly healthy for a our complex inventory system like ours, you know.

In modern trade also, we continue to build reach, an outlet presence, you know. This is on account of the offtakes that the brands sees, and the share gains that the brands are seeing, you know.

All in all, offline is in healthy shape, and ready to service the brands and growth trajectory in future as well, you know. We continue to invest in product renovation and innovation, you know.

Again, we've got multiple new formulations which have delivered blind test winning you know performance with international leading brands in their, score partitions, and we're very happy to see the performance that these products continue to deliver and what our R&D team continues to deliver, you know. This is a continuous process, not a one-time activity, you know.

It's a muscle that we have built and we keep deploying these muscles to make our products even better for our consumers as we move forward, you know. I think you know from a future perspective, what we talked about, we keep looking at white spaces in the landscape, and keep building hypotheses around those white spaces, you know.

Sometimes we come across brands which completely fit into those hypotheses, you know. I think Reginald Men has been one of those brands which completely fit into our male skincare boom hypothesis, and the brand has done extremely well in the last two years of its existence, and become the most searched men's sunscreen brand, you know.

They've done a multi-benefit proposition, which men like. They don't want to get into multi-regime, but, products which can do multiple things in one, and also helps us enhance our presence in South India, since we've not only acquired a brand, but acquired a talent and a team which sits out of Hyderabad, and continues to run this brand, which will help us strengthen our understanding of the region as well as find ways to strengthen our brands in that region.

Us being a Northern company, get that you know slight disadvantage, in terms of the talent that we're able to get here, but now having presence in Hyderabad, we'll actually be able to hire and attract more talent, which can help us strengthen our presence in South India, and it also, of course, is additive to Honasa's portfolio, where we did not have any brand that focuses on men's skincare, you know. All in all, pretty excited about this acquisition, you know.

I think overall, we we've been focusing on refreshing our playbook, right, or flywheels so to say, and we're feeling quite confident, that now the principles that we have come up with, which start by focusing on identifying the right partition, building a product which is a blind test winner in that partition, focusing then on investing sufficiently behind that hero product, right, through the right content and media you know mixes, right, and providing it a distribution supercharge across both e-commerce, quick commerce, as well as offline landscape, followed by again keeping an eye open for future growth engines where we can deploy the same cycle, is giving us strong confidence that we'll be able to, sustainably use this cycle to deliver market-beating growths and gain share across categories of our interest, as we move forward, you know. Of course, we continue to to build purposeful brands which not only grow, but also contribute to the society, you know.

Mamaearth has now planted over a million trees, you know. On its birthday this year, we ran anti-smog guns across NCR to help reduce pollution, you know.

Derma Co continues to educate children through science classes and science labs that we set up. We've touched almost 40,000 students' lives, you know.

BBLUNT continues to certify women in hair care and styling, over 15,000 women done. Aqualogica is providing fresh water to rural households by deploying, plants where they can get access to fresh water.

Dr. Sheth, is running health check-up camps, now almost 45,000 plus individuals touched by this.

Right, so, all in all, as our brands grow, the contribution to community also grows, and that's what we would like to sign off with, and we're more than happy to answer the questions that you may have. Thank you.

Thanks. My first question is in sunscreens we have seen the market leader become a bit more aggressive past few months.

How has been the market share and I'm asking about the real market share in your sense, not the official third-party market share data because that may not give the true picture many times. What is the sense on how is the market share shaping up in sunscreens?

Hi. Honestly there is no other indicator of market share that we get for online.

The only place that we get is from Nielsen, which is offline, and honestly we believe 60% to 70% of the market lies in online. We did get a Euromonitor indication last year which has declared that Derma Co is now the number one sunscreen brand in the country, ahead of the legacy brands.

That's one external piece of data which is based on external interviews that we have. Otherwise, our brands continue to be strong, our brands continue to be best-seller across sort of platforms, and our focus on using multiple brands to win in the sunscreen portfolio, where we have something in actives in Derma Co, in hydration in Aqualogica, and naturals with Mamaearth, continues to be an area which is delivering well for us.

Thanks. My last question is it was a strong quarter for you and even your core brand of Mamaearth has seen good growth come back.

Your distribution expansion also has been quite decent. My question is how do you see coming quarters?

This kind of a good uptrend will continue or there was some kind of a one-off, any GST kind of a positive impact you saw overall in the quarter?

We're feeling quite confident, that our flywheel and our fundamentals have started to clearly deliver in terms of strong outcomes for the company, both in terms of top-line and bottom-line. We are very confident that this trend of delivering strong growths, and continuing to improve on our margin profile year-on-year is something that will continue, and we don't think it's a one-off GST impact.

It's actually share gain that we have seen that we've also shared. If it was not share gain driven, then one could have said everyone's rising because tides are, but we have seen strong share gains in our core categories, right, which clearly points to the fact that we have done significantly better than other brands, which is why this has happened.

The investment sort of playbook that we have built around media and content continues to become even better. I think we're feeling quite confident on being able to continue this trajectory.

Sure,

thanks. That's all from my side.

Thanks.

Thank you.

Hi. Good evening, Varun and team.

A few questions. First continuing with the earlier one, teens growth in case of Mamaearth, basically you are saying this is something that let's say we can build for the next let's say for the next five quarters until FY27 end?

Vivek, that's going to be our plan, and we're feeling confident that we should be able to deliver the same. There is so much opportunity like I said in terms of just the gap between share among standers and market share, and hence the potential distribution gain that we can do, as well as the brand now strengthening, and multiple other categories available where we can gain share.

I think we're feeling confident that we should be able to continue with this momentum in this double-digit for Mamaearth.

Got it. Interesting.

For the last few quarters, and more specifically this quarter, you have been highlighting and talking a lot about distribution, right? Now, historically there has been a curve that you have followed.

Again, I'm just putting some, let's say, random numbers so to speak. Let's say, if at ₹500 crore you started going online, and you thought that you will go online, do you think that milestone or that threshold comes down because your distribution network is far more robust, therefore, you don't necessarily have to wait for ₹500 crore, you can start early?

If so, what does that imply for the growth brands?

Vivek, to be honest, I don't think that milestone has changed significantly. What I can qualify is that it's not a brand-size milestone, but more of a category into brand milestone, right?

If you're in a category and you've become sizable share within that category, even if you're not ₹500 crore, but let's say if you're in sunscreen and you become ₹200 crore just in sunscreen online, then also you have right to go into offline. The offline play for brands, right, in our mind is not just about distribution, it's also about pull.

Only when you reach a certain scale in online that you see that natural pull in offline, because of which you're able to then execute better, right? Now when Derma Co was taken offline, actually our retailer margins in Derma Co are lower than what the retailer margins in Mamaearth are, because it has gone offline when we have already established Mamaearth, and the Derma Co pull was also established, right?

It allows you to build the brand more effectively, as well as it allows you to build more confidence amongst retailers. In my mind, those benchmarks haven't changed.

In fact, in future, those benchmarks might go up because the online market itself is expanding. What you can achieve in online in terms of benchmarks, every three to five years, that benchmark itself will keep increasing.

Wow, that's interesting, Varun, because I thought the entire thing about traditional FMCG companies always was that there is a massive pull, let's say, for their hero brands and products, which is significant to the overall revenues, and then they will push, or the new brands will ride on the pull factor. There is a pull, and then you have a push.

I would have imagined with Mamaearth also having so much pull, you could have probably accelerated that migration or that duality, but you don't think that that's going to be the case? Purely because your distribution quality and scale has gone up.

Yeah.

If we want, we can put it in stores, but that doesn't really help, right? Just today's consumer is got multiple sort of choices in every category.

In 10 to 15 years ago also, that phenomenon wasn't as diverse, and they largely know what they want to buy. Just because a brand is available in stores doesn't give the brand a right to win in offline.

In our view, brands will win when they get created traction and pull, and that takes its own journey. If you've not been able to establish it in online, then ideally one shouldn't extend it on offline, because you will just create high SDRs for the brand, and in general your retailers' and distributors' capital will get stuck in wrong kind of inventory, which is not moving, which will not allow you to put the right kind of inventory which can move faster.

We're being very choiceful, and we're taking care of the fact that there should be high-velocity SKUs which should be put in GT. Even in Derma Co, it's only set of 20 SKUs that we've taken into offline, which are the highest-velocity SKUs.

I think that's our philosophy. We'll continue to execute like that.

Got it. Last question, which has two parts, both from a top-line and margin perspective.

I'm sure you will say that market has always been competitive, but Varun, when we talk to the traditional legacy FMCG companies, I think there is a renewed focus and impetus to drive growth in online because quick commerce and whatever is happening on the landscape. Two parts.

One is, how do you think about the entire competitive density from your growth perspective, as well as from a margin standpoint? Because a lot of companies are happy to spend much more to drive growth.

Can you just talk about both these aspects?

Happy to address that, Vivek. Honestly this focus change and aggression has been there for now six-plus quarters, I think, where it was clearly recognized and a lot of folks restructured and clearly announced their focus to build this, and also have used multiple levers including deep discounting, etc., in these channels to drive sales.

In spite of that, we have seen our trajectories only improving. As we also build the organization, I think our DNA, the fact that we are digital-first, our understanding of Gen Z content engines, and the way the organization is tuned towards that, will always provide an edge in terms of us being able to be faster in terms of winning in that environment.

We're feeling confident that if we could ride the aggression which has been there in the last one year, even if it goes up, I don't think anything is going to stop our plans of performance. We'll continue to find ways to ensure that we are ahead of the curve.

Super. Thank you.

Wishing you and your team all the very best.

Thank you.

Hi Varun and team, congrats on a great set of numbers. I just wanted to sort of zoom in into the margin delivery.

The margin has come at the cost of some cut in the ad spend, and even other expenditure is on the lower side. Just wanted to understand, is there any quarterly phasing issue, or whatever reductions that we have seen are sort of structural in nature and likely to continue?

Hi, Percy. I think I've always called out that there are three key buckets from which the company will see EBITDA expansion happening both in short and in long terms.

Those buckets are A&P leverage, those buckets are payroll leverage, and other OpEx leverage. The combination and contribution from these three might vary in different years, but these are the three key buckets that we know our leverage will come from.

Even this quarter if you look at just the A&P part, actually value A&P sequentially has gone up, and hence it's not a reduction. We continue to be strong, we continue to be fully funding our brand and marketing plans, but we've become more effective.

The same plans focused on certain core categories consistently and focused on sharper media and messaging are now delivering much better outcomes, right, because of which the percentage is going down. Of course, there are quarter-to-quarter phasing pieces also which continue to sort of exist, but I wouldn't honestly worry them because if there is phasing in one, in the other buckets you can see that sort of benefit that can come in.

All in all, I think that trajectory of A&P in value actually increasing every period, but still giving us leverage benefits in percentage, right, is something that we are confident will keep happening year, as well as the combination of payroll and other OpEx, sometimes because of others and sometimes because of payroll will continue to give us that benefit year-on-year, is how we see that happening.

How do we look at margins going forward? In FY27 on a full-year basis, should we look at 100 basis points YoY expansion every year for next few years, is that a fair expectation for us to have?

Yes, Percy, that's a fair expectation, right? That's the plan that we have talked about in the past as well, that every year our goal will be to improve the margin profile by 100 basis points.

Got it. Second question is on the newer brands.

We know that Derma Co is doing very well. Can you give some information on Aqualogica, is that doing equally well, are the growth rates similar, lower, higher, etc.?

Also related question is that now that we have the ME portfolio back on track on growth, what could be the next Derma Co or Aqualogica? We have now three brands which probably constitute 90-95% of our sales, and while there is still scope for growth in Derma Co and Aqualogica, we obviously have to build ahead of time.

What can be the fourth pillar apart from these three brands, where you can see some initial signs of success or which you think can sort of become big or drive growth over the next two, three years where you have confidence?

Percy, on the first part of the question, I think we always talk about our young brands together, the young brands have delivered 25% plus growth, and we continue to be very bullish on the future of our younger brands. From a perspective of what could be the next rising star, honestly it's a race to be the next rising star.

Reginald can itself be a ₹500 crore brand in the next four to five years that we've acquired. Dr.

Sheth has a very strong sort of right to win, like the tailwinds in actives as well. BBLUNT in professional hair care can become a sizable opportunity.

Staze, it is a young brand, but is playing in the color cosmetics business, which itself is a very large category, could also be a shining star. I think in our view, there is a race to become who'll be the next ₹500 crore, and we would like to see that happen.

Very clear, Varun. If I can just ask one follow-up on Aqualogica.

Percy,

Am I better now? Is it better now?

Yeah. Varun, while I can understand you don't want to give the numbers separately for Aqualogica, Derma Co, etc., and I'm not asking for that, just want some kind of reassurance that Aqualogica is also performing sort of well and is in line with whatever targets that you had put in or is it sort of falling short of them?

It's on plan.

Got it. That's all from me.

Thanks and all the best.

Hi. A couple of questions have been answered.

Just one more in case of Mamaearth, you've spoken on product superiority and sharpened investments driving that growth to mid-teens. To understand the impact from these interventions, is it also possible to share any further color on as to how has the cohort retention or repeat rates or, say, productivity at distributor level changed for whichever channel available?

I think when you see this kind of a growth which is happening across channels, and it's not just happening in primaries, but in offtakes in modern trade, in Nielsen captured share, in secondaries in general trade, across e-commerce, it just points to the overall consumer franchise becoming stronger for the brand, right? I don't think we're at this size and scale, we're looking at numbers like repeat rate or cohort, etc., because that becomes too small.

At young PMF level, it makes sense to sort of do that, but overall brand love, affinity, consumer feedback data, NPS, everything is moving in the positive direction. Our SpONTOM on the brand is also moving in the positive direction.

All of that is put together making us feel confident that the actions that we have taken, and which we continue to apply on the brand, are in the right direction.

Sure. The second bit was in continuation to the earlier participant's question on the other brands.

Do you think that there are further interventions in terms of either innovation or brand repositioning which are required for upcoming brands like Aqualogica, Dr. Sheth's or BBLUNT?

Honestly every three to four years, we look at our brands, right, and we re-look at the positioning from the future TG perspective. We've done that on Mamaearth twice now in terms of packaging and communication relaunch.

We have done that on Derma Co once already in its life of six years, and similarly Aqualogica actually, we've already done a lot of work, right, to make it more appealing to Gen Z and Gen Alpha, and there is a new refresh which is coming up in the summer season. Similarly, Dr.

Sheth's will also see that journey. Honestly, that's a continuous exercise that we will do on our brands to make them more relevant and exciting to the new generation.

I think we would see continuous action across brands for us.

Sure, got it. Thanks.

That's all from my side.

Yes,

Hi, Varun. Hi, am I audible?

Hello?

I'll just come back. There is an issue with my line.

I'll just come back.

Sorry for that. Hi, Varun.

My first question was just again asking on the margin bit. I do understand you mentioned about the three levers of optimization, and on the advertising bit, it is absolutely clear in terms of the focused playbook that you've been mentioning.

If you could just dive down on the other expenses part just for an understanding perspective that what are the initiatives you are taking? Also on the gross margin side, I'm not sure if I've adjusted for the reporting change of last year, but I do see that this quarter there has been a bit of a contraction.

If Raman could just highlight that what is maybe the reason why the gross margins have adjusted, and what are the initiatives you're taking on the ex of advertising side to keep margins improving?

Actually if you look at on a like-for-like basis, our gross margin is year-on-year flat. I think this is in line with our gross margin guidance that we will continue to sort of look at 70% and 70% plus range.

Of course, there are other factors in gross margin which is category mix, seasons category mix, brand mixes, and of course, so that's one piece on the gross margin side. I think on your other question on other expenses, largely other expenses are broken in two parts.

Large part of it is our supply chain distribution expenses, and then there are of course typical fixed overheads, admin, and infrastructure-related expenses, right? When we see our other expenses as a percentage are improving, there are two levers there.

One, of course, given the scale of the business sequentially and year-on-year has increased, I think that's leading to leverage in our fixed overheads. Of course, as we become larger, and also as certain channels like B2B offline channels become larger, our supply chain mix is also improving, that's also leading to better other expense as a percentage.

I think those are the two large levers and as Varun mentioned, as we continue to sort of scale, I think we'll continue to drive some efficiencies across of some of these levers.

Got that. This improvement of 100 bps that you're targeting, most of it will be driven by the optimization in advertising spends?

Is that the better way to think about it or just any comments around it?

Oh, actually it's a mix, right? Some years it might be skewed towards A&P and other year it might be skewed towards OpEx, but the combination of that should help us achieve the goals that we have set for ourselves.

Got that. Varun, my last question was that over the course of the last few months with the two acquisitions that you've done, potentially we are now having a business which has eight brands.

I know there is big skew of how much Mamaearth and Derma Co contribute, but just as an organization somewhere, the thought would also come in that how do you then give the focus to each of these brands so that they all scale up? There is obviously a discussion happening about how the brands ex of Mamaearth and Derma also scaling up, but how do then we keep our focus to see to it that all these brands get the right element of growth, and given the fact that even Mamaearth at this point in time is in the midst of a transition where you're more or less done with the offline strategy, but still there is an effort that is required to get that in place.

How are we sort of aligning to get the focus right given we now have such a wide portfolio of brands already in place?

I think we would want to keep our goal in front of us and make sure that we construct and structure the organization to achieve that goal, rather than keeping our current situation in place and set our goals accordingly. I think that's our thinking.

In line with that, if you want to make sure we reach our long-term goals of becoming the largest and the most loved BPC FMCG in India, we will need to make sure every category, every proposition, we have a brand that's actually a market leader. To get to that, whatever organization structure will help us serve that is what we will build.

Which is where there is separate ownership of each brand, right, of each channel which exists within the company, where someone is losing their sleep over their own part and partitions. That's what we would like to sort of focus on, because our long-term goals are pretty hefty, and we wouldn't want to shortchange them based on where we are.

Sure, Varun.

That helps. Thank you.

I have three questions. One is just on Mamaearth, could you confirm that the 10% growth is also coming from, let's say, the same distributors also growing, and the penetration-led growth is an addition to that, is that a fair understanding?

Yes, actually. 90% plus of the growth is from all current distributors only.

It is not because of new distributor appointment. It is all on the back of the top 100 cities where we have our distributors in place, especially in GT.

Then, of course, in modern trade it is on account of the same large customers like Reliance, DMart, Apollo, which continue to exist, right, and we're gaining share within those customers. Same is with e-com, actually, it's not in new channels.

It's the same customers which have existed.

That's all repeats, right, Varun? That's a fair understanding, right?

Most of it, 90% of it is repeat?

Repeats in a sense that we're of course getting new consumers to buy us. Right.

Okay.

The second question was look, on a sequential basis, the employee cost, although you talked about employee cost being a leverage item, on a sequential basis and maybe short term, employee cost has risen very sharply. Any one-offs to call out for, or that's the steady-state run rate?

Hi Pratik, Raman this side. I think it's higher sequentially primarily because we've actually had to do a ESOP provisioning, and basically, there is a larger leadership ESOP pool, and there is a certain milestones aligned, and we had to prepone a milestone this year and the allocation of that is actually in H2 rather than in H1, given the visibility of a certain milestone internally.

That's why it's showing on a higher side. It'll be similar, broadly similar in H2, and then of course, after that it'll move back to the normal levels.

The entire delta is coming from ESOP cost, is it? A lot of Roughly

about, close to 100

bps. Not entire delta, I'd say some part of it is because of ESOP cost, some part of it again because of the better-than-planned performance of the enhanced variable also that we see happening, right, because people have done better, and we could see the visibility of that only towards now, we've taken that in Q3 and Q4.

Last question, if I see your focused brands, they've grown at 25%, whereas overall sales have been slightly lower, right? What's the share of non-focused categories now as a percentage of sales?

It's still at 25% for the company. So, 75% is focus categories and 25% is non-focus categories.

Despite being non-focused, it looks like they're still maintained pace with the overall growth, is it? That's why the share is not moving a lot.

In a sense, it has gone up from a contribution perspective. Yes, the non-focus categories are growing much slower relatively compared to the focus categories, right, and we see that to be the phenomenon.

The contribution over the year has come down by 500 basis points for the non-focus categories, which is something that we expect every year to potentially happen.

Got it. In the next 2-3 years, does this become quite immaterial for the company in the sense, is it a fair understanding that in the next 3 years focus categories kind of become 90-95% of the business?

Honestly, with the current pace of contribution increase, we expect it to get to about 85% to 87% over the next three years.

Thank you. Thanks.

Even within focus categories, hero SKU contribution continues to increase, which is also healthy.

That's good to hear. Thanks, Varun.

Thanks, team.

Thank you.

Good evening to the team. I have two questions.

My first question to Mr. Varun is as Honasa continues to expand across categories and geographies, what will be the key priorities under your long-term and short-term goals?

How do you see the balance between scaling new brands, deepening distribution and sustaining profitability evolving over the next few quarters? This is the first question.

I'll ask my second question after this. Thank you.

I think you've just elucidated on my business plan, right? Those are the three priorities that we continue to have, right, which is continue to make sure our core Mamaearth grows in double-digit, continue to make sure our young brands deliver market-beating performance and build new categories which can be future engines of growth for them, and continue to make sure our distribution, be it online or offline, is excellent and builds base for our brands to grow.

I think we will need to balance all three together to make sure that growth and profitability both fall in line for the company, and we're quite confident in our team's ability to do so.

My second question to Mr. Sohi is, as the company plans forward, what financial guardrails will guide your decision on cost discipline, capital allocation, and margin protection?

How will these particular set of guidance influence the long-term and short-term earning stability and create shareholder value? Want to understand your plan of action on this particular thing.

Thank you.

Sure, thank you. I think like Varun mentioned, I think the focus is to ensure that we continue to deliver market-beating growth.

Given our gross margin profiles that we have, as we continue to scale the business, improve our distribution metrics and deliver that, I think every year we will continue to unlock certain margins in the business, which we spoke about. I think our endeavor is to unlock at least 100 bps every year with a mix of both A&P and OpEx.

I think that will ensure that we continue to improve and deliver the right value to our stakeholders and deliver the right profit growth as we sort of move along in building this platform.

Thank you and best wishes.

Hi, team. It's good performance and a great set of numbers.

I just want to understand on the competitive intensity. Over the last 2-3 years, we've been seeing that the science-led and active-based positioning has becoming more of a mainstream among the peers and the large FMCG peers.

As you scale deeper into an offline and become more of an omnichannel brand, how do you see the competitive game shifting on an agile tech-led disruption to scale and the distribution-led companies competition? I just want to understand how is your strategy evolving in this context.

I'm so sorry, I did not understand the question completely.

I just wanted to understand now you are scaling more into an offline, and I just want to understand how is the competitive intensity shifting on the agility-led distribution to scale and the distribution-led competition. What's your strategy on this context on this?

I think firstly, our offline and online both continue to grow strongly and delivered 20% plus growth for us. It's not one or the other, but both our channels that we want to win in.

In one case, which is online, we are strong, we need to continue to hold and gain shares in that, and in the other case, there is opportunity to just build distribution and be present in more outlets, which we are doubling down on. Hence we're largely looking at the opportunity and not the challenges as much, because the opportunity seems to be so big that that's what energizes and excites us.

Because I just wanted to double-click on this because you have this early-mover advantage and is it been more towards on a margin or volume profile? That's why I just wanted to double-click on this.

No, of course, in general, as a system, our margins are better than the legacy competition and our pull is better than the younger D2C brands, and I think that combination is helping us grow fast and gain share in offline, both general trade and modern trade, and we will continue to use that to our advantage to deliver competitive. Okay.

Perfect. Second thing is on the other brands.

Now with Mamaearth also stabilizing and Derma Co also scaling up strongly, the younger brands are growing up, and with new initiatives like the prestige and oral beauty, now how are you internally prioritizing the capital and the management bandwidth to ensure that the focus doesn't get diluted across much, and you have the growth levers of the engine coming up?

I think firstly, it's important to structure yourself right, right, where there are clear accountabilities and that's an area where we continue to work on. Every year, we have new learnings around how can we construct better to give focus and impetus to our areas of growth.

Management bandwidth actually goes firstly into the right organization design, because if you can design right and put the right people into that design, then the design takes care of the outcome. That is what we spend a lot of our management bandwidth on.

Investment allocation is more based on the chessboard. There are years where there might be tailwinds in a certain category or a certain type of proposition or a brand, where you would want to use those tailwinds and gain disproportionately, so that's the decision that you will take.

That depends more on some of those externalities as well, based on which we take active decisions on allocation.

Okay. One final if I can squeeze in.

Now with Mamaearth expanding deeper into the GT and also the chemist channel, how do you preserve the brand premium? While you scale up, on a long-term perspective, you intend to be a mass-penetrated brand or structurally move up on the value chain?

I just wanted to understand the unit economics into this.

We've maintained and will continue to maintain brand premium versus mass brands. That brand premium is visible in the PTML of our pricing in the market.

It is also visible in the fact that we do not participate in the FMCG-defined LUP spaces, right, which is the less than ₹20 price point kind of spaces. Access into Mamaearth really starts from ₹100 onwards, which is why there is that aspirationality maintained.

It might limit the expansion opportunity that we'll have from a gross general trade perspective, but our long-term view is that premiumization is going to be a mega trend in the country, and brands which are able to hold aspiration will be able to gain much better share in the long term.

Perfect, perfect. Good luck and all the best.

Thank you, sir.

Thank you.

Hello. Congratulations on the good set of numbers.

I wanted to understand, in increasingly competitive categories like sunscreen, some brands rely on indirect or ecosystem-driven narratives rather than direct branded communication. How does the company ensure that any extended marketing ecosystem, agencies, influencers, operates within a defined compliance and reputational risk frameworks?

I think there are clear guidelines, briefs, which are in line with the ASCI guidelines that at least our company works on, whereby every brief that we issue has clear guidelines which are provided. Everyone who we work with aware of those guidelines and we haven't been flagged by the agency also on any such violations.

I think the content that we are at least doing must be in line with those guidelines, which is why we're not, and we continue to absolutely follow line there.

Okay. There are oversight mechanisms within the company to monitor that, right?

Absolutely.

Just another question. Can you break down what percentage of sunscreen growth is organic repeat versus influencer-driven first-time conversion?

We don't track that.

Okay. HUL is acquiring new-age companies like OZiva and Minimalist.

Does that possess a threat for the business going forward?

On their business or our business?

On your business as those traditional business are modernizing very rapidly, and they have all the guns out there to play it right.

No, honestly we have always had competitive threat in the past as well. We were born in a category where there were much large competitors than ours when we launched Mamaearth, and hence competition is not new to us.

We have always also taken a stand that it doesn't sort of give you any joy or delta by focusing on competition. The real value gets created when you focus on the consumer, and where the consumer is moving in terms of their preferences, be it product preferences, be it communication preferences, be it media preferences, or distribution preferences.

I think for us, that's been a core focus area, and I think we will continue to focus on that, and will rely on the fact that if you focus on that, consumers will reward us with choosing our brands.

Thank you.

Thank you so much for asking these questions. It's always refreshing to hear you.

We continue to as a team execute our strategies to the hilt. We are very confident that we will continue to delight you as we get into this year as well.

Thank you so much.