Honasa Consumer Limited (HONASA) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Hunasa Consumer Ltd. Q1 FY27 Earnings Conference Call, hosted by JM Financial. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Pooja Kubadia from JM Financial. Thank you, and over to you, ma'am.

Hello. Good evening, everyone. Welcome to 1QFI27 Earnings Conference Call of Hanasa Consumer Limited. Today on call, we have Mr. Varun Alag, Co-Founder, Chairman, and CEO, Ms. Ghazal Alag, Co-Founder and Chief Innovation Officer, and Mr. Ramanpreet Sohi, Chief Financial Officer. We'll start the conference with prepared remarks from the management, after which we will open the floor for questions and answers. Over to you, Mr. Varun.

Hi. Hi. Hello, everyone. Welcome to the quarterly call for Honasa consumer for quarter one F527.

We have our team, Raman, Ghazal, and our team with us.

But I'll take you through the performance update quickly, and then we will open the house for question and answers. Oh, so moving forward. Oh, okay. Yes, so starting with the section, which is crystal gazing into the future of Indian beauty. This time, the theme that we have captured is the theme of fragrances as a category. Fragrance is a very interesting category. Globally, as we speak, fragrance is the largest delta driver as a category in beauty and personal care. It's also one of the largest categories, and especially a category which has premiumized very effectively over the last couple of decades. Currently, if you look at India, it is one of the fastest growing categories amongst beauty and personal care. In India, currently, penetration for fragrances is just 3% versus 11% globally, which is why, if you look at, in terms of the BBC market share, in India, it's just 3% market share versus 11% for U.S. It's also a category which is moving towards e-commerce. You know, seven years ago, one of the things which was being highlighted was that this category is very about experiences and hence might not move to e-commerce, but we have seen strong move towards e-commerce because of trial packs that have come in this category, as well as understanding of notes which have grown amongst consumers.

If you look at Indian market also, we've seen a

very strong transition from deodorants to fragrances. So we believe over the next decade, this is going to be a very interesting category to participate in for BPC players, right? And which is why in our five-year journey, we had talked about this being one of the categories that NASA will be interested in unlocking as Horizon 2 categories. Moving from the future to present, which is our financial snapshot for quarter one, I'm glad to announce that this has been a great quarter for the organization. The team has done brilliantly well in delivering 32% growth with a bid of almost 110 crores. 90 crores. This has also been driven with volumes, so 30.5% volume growth is what we have seen, and we continue to be negative working capital and generating almost 83 crores of cash. It's a quarter which has seen significant improvement in our EBITDA profile over the same quarter last year. As we have mentioned in the past and we continue to hold, the two large buckets through which we see our business improving our EBITDA profile is the bucket of AMP, which improves with higher mix of profitable beauty. B2B channels and growth momentum of our core brands as well as our younger brands becoming more profitable. And while all of this happens, the absolute NP spend still continue to grow, which is helping deliver strong growths for the company. So that model that we have talked about is clearly consistently playing up for the company. And the second bucket that we have talked about is operating leverage. As we scale, we also see fixed leverage coming in. And in this quarter, we have seen almost 300 to 350 basis points, which is because of mix impact and 100 basis points because of operating leverage. But there's also 50 basis points because of seasonality within this quarter. Q1 being summer quarter, and some of our core categories being face wash and sunscreen, which are also high margin categories. And this quarter is usually also a relatively healthier quarter. So that also is sort of there. And of course, thirdly, there is a non-recurring one-time OPEX benefit that we have seen within this quarter. But all in all, the commitment that we have made from a five year perspective, which is that we will continue to expand EBITDA margin by 100 to 150 basis points each year to get to that 15% EBITDA margin in five years, right, is something that we are moving towards and is something that we stick to. And we have, you know, of course, by quarters, it'll vary. But we've seen a good movement as we have grown. This is a slide that we have showed in the past three quarters as well after the Flipkart settlement process came in. And this is actually the last quarter we'll be sharing this because from next quarter onwards, the base of settlement will become clean. And then we'll be able to, our reported growths and our like-to-like growths will actually become same then. Currently, there is a slight difference that you see which happens because of the settlement issue. But we have explained this in the past as well, and we continue to see this next quarter onwards. The healthy thing is about, you know, us being able to deliver this growth on the back of the stated strategy. The stated strategy was that we will be sharply investing in a few focus categories. And those focus categories will help us drive strong growth. We have seen that focus categories actually have grown 35% plus. And we have also seen growth coming across channels, e-commerce channels, 40% plus growth, general trade and modern trade. All the work that we have put in redesigning our distribution system, the hiring of the right kind of GT teams has actually really helped us in terms of on-ground GT growth, which are now at 40% plus for secondary growth. And in parallel, the strong brand strength and traction that we have been developing is showcased in modern trade offtakes, where we have autism plus growth in terms of offtakes. And now, the contribution of focus categories has also increased to almost 85% in the F517. Again, another area which has been an area of focus for us to make sure that our core continues to grow strongly. And this is where the large brand playbook that we have built has been tested. And clearly, every quarter, we have demonstrated it to become better. This is in line with that. And Balmer Earth has accelerated to high-teams growth in Q1, F527, driven by focus categories. In fact, even within focus categories, driven by our hero skews, which we've been focusing Dice has become our number one face wash now. Upton is again growing in strong double digits. Shampoo is, rosemary shampoo is growing in strong double digits and has become a hundred crore plus ARR ingredient now. And Sakeir also grew very strongly this season for Balmer Earth. So continuously, whatever we are focusing on is where our growths are also coming from. And that just gives us confidence that this is an input-driven growth model. And as long as we keep those inputs intact, we'll continue to do well. And of course, this growth would not come in if the consumer love backing the brand would not exist. So we have worked strongly on product enhancement and communication relevance. And that is visible now in growth in brand searches. It is visible in our share amongst handlers increase. It is visible in our Gantar brand power score, which is at its ever highest. So I think all in all, consumer love is visible both in output metrics like revenue and market share, but also in input metrics, which are measured from consumer tax. Apart from this, you know, the core is growing strong, but the new is also growing stronger, right? And I think for us, that's the headline that both parts of the business are growing strongly now. Young brands continue their strong growth at 40% plus. We are using them to take a higher share of VPC as a category and executing them well, which is visible in the outcome of the call. Specifically, the good news is that, you know, we now have the second thousand crore brand within our portfolio. This is a very heartening moment in news for us, because we've been able to take our second brand to this, gives us more confidence that in future we'll be able to build more, you know, thousand crore brands within this company. And the brand recorded its highest ever brand searches. Dermocomore has also seen strong traction in offline and modern trades, which is visible in municipal shares now. Face cleansers has become a relevant category, more than 200 crores run rate now. And the EBITDA profile, as the brand grows, continues to become better. And it's entered Teens EBITDA Club now. That's a healthy dimension that we continue to see for the brand. BTM Ventures, which we acquired in January, it continues to do well. It has reached an ARR of 150 crores in the last quarter. Since we acquired, we've actually grown it almost 100%. And we've also been able to expand the franchise of the brand to Maharashtra, open a new category, as well as unlock new channels, which is what are. basis of acquisition growth modeling was, right? And we've actually been able to deliver it. This again shows that the company has the muscle to do inorganic acquisitions and actually scale them fast off, right? Which in the long term will continue to be growth driver for Colasa. We have seen strong growths in both general trade and modern trade. Again, in the area where we strongly focused, improved our distribution model, improved our execution, got higher quality distributors, reduced our DOH, and all of that is visible in healthy secondary sales. Which are coming in as well as the brand strengths, like I said, is visible in the modern trade growth, and this has come by gaining shares, so almost 350 basis points gain in share in face washes, 160 basis points gain in share in shampoos, all in all, a pretty healthy execution by the offline team, leading to outstanding results. E-commerce channel grows strongly. We have a strong focus, and we continue to focus on three areas. We continue to build our focus categories, which are actually grown over 25% in e-commerce. We continue to focus on gaining share in quick commerce, and we continue to focus strongly on taking share in tier two and beyond markets channels, which are strong there. And which is visible in our overall growth. Our innovation capabilities continues to strengthen our portfolio across brands, wherever we are seeing opportunities to serve the consumers better through newer ingredients, newer science, as well as newer formats. And the company continues to innovate and bring products that consumers are giving love to. And we will continue to do that. That's right. Innovation has been one of our strong edges, and we will make sure that it continues to remain. I talked about fragrance at the beginning of this presentation, and that was, you know, one of the reasons was because we have finally entered this category. And we have talked about this category multiple times in the past, that we like the category. We have been doing work on this category for almost one and a half years to make sure that we have a differentiated product proposition with which we are able to enter this category. And we finally have launched a brand called Fikin. It's India's first elixir-based brand, which is the highest dosed and strongest form of perfume that we have brought to India. And these are one of the key needs for Indians, given our temperature, given the sweat profile that we have, as well as external environment that we have, is perfumes which stay longer. And that's what we have optimized this for. The perfumes are clinically tested for 12 hours long stay. The design with which we have launched is actually patented by Monasa, right? It is again a first world design that we have brought in fragrances, right, for our collectible packs. And we're very confident that this brand is going to be amazing as we scale it. And with that, we come to the last section. As we grow, our community contributions also continue to grow. Our brands continue to plant more trees, teach more kids, give more certifications to women in salons, provide more fresh water, as well as do more health checkups. And we'll continue to have purposeful growth as a company. And with that, I'll come to an end. Thank you so much for listening in. I would love to answer the questions that you have.

Thank you very much.

We will now begin the question and answer session.

Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Participants viewing the webcast may enter their text question below the screen. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Vivek M with Jefferies. Please go ahead.

Hi, Varun and team. Good evening. Two questions from my side. First is, you know, I know you are a very young company with young brands, but when we look at, you know, purely from a YOY comms, as we head into, let's say, the rest of the year, the comms start to get higher. On that, you know, let's say revenue base, what is your expectation for growth, let's say, from a nine-month perspective?

Hey, Vivek. So, Vivek, like we've said, from a five-year view, we have a high-teens agenda. We will make sure that we deliver that CAGR over the next five years. If you divide that over years, there'll be years where we'll do better than that in terms of our overall growth profile, and there'll be years where we'll be just about that CAGR in terms of our growth profile. And I think this is going to be an year we'll be better than that on the growth profile and the attempt will always be to make sure that we continue to grow faster. Priority will be wherever we can reinvest to grow faster, we do, right? And that's what we're doing. But we stick to our five-year callout of where we want to get to, which we communicated in our investor days.

Sure. And just to follow up, Varun, do you think, you know, on the Mama Earth side, how do you, you know, think the trajectory will be for the rest of the years? You have done exceptional job in this quarter. And I think Mama Earth for the last few quarters has also done very well. What do you think, William, will be the trajectory? And apologies if the question is more near term, but I just want to know how does it, you know, how does it progress for the rest of the year?

You might find my answer, again, boring, but like we have said, Mama Earth from a five-year perspective will be a double-digit Caliber growth story. We stick to that story. We would make sure we deliver that. Again, it usually never is an average journey over the next five years. There are years which we'll do better in terms of our growth profile, and there'll be years where we'll be sort of almost at the level that we've said. This year, again, even for Mama Earth, will be better than the planned growth profile is how it's sort of looking and feeling like. Inputs that we are doing, the distribution gains that we are sort of getting are actually serving us in getting to the goal that we want.

Good morning. And the second question is on your point on, you know, on the call out in the presentation on gaining shares on QuickCommerce platform. Now, two parts or two things over here. Apologies first if it's a naive question, but what level of data that, you know, the platform share with you when you say gaining share, is it at the category level or is it at, you know, at an overall level, number one? And the second part is, when we look at any of the QC apps, it looks like the number of brands are expanding by the day, literally on a daily basis. How is it that you are able to still gain market share given that there is a traditional FMCG from which market share can be gained, but you yourself have been ahead in this game. So how are you ensuring? So two parts, if you can answer on both, please. Right.

So, Vivek, we engage with the QC teams and we get understanding of category level shares. So, we would track, for example, what is Honasa's share in a face wash, in a sunscreen. Of course, this is not a third-party audited data like AC Nielsen, which is why we would not sort of, you know, share it in the platform. This is a data that between us, customer, and, you know, partner, because of the relationship, and, you know, we get it, and we drag that data. So the data is at category level, and we look at Anasa's share in every category and how we are getting it. So that's to the first question. The second question, honestly, compared to e-commerce, quick commerce is, in our view, especially in our category, a further branded purchase play, which means that if for any category in e-commerce, we see 50%, 60% of the sale coming from branded searches, in case of quick commerce, it's higher. And hence, we believe that quick commerce, people buy, people are evolved enough to know the brands that they want to buy, especially in our categories. And they come searching for the brands. And quick commerce is able to fulfill that in just 10 minutes. So, for us, building the brand strongly in the minds of consumers, which is measured through our brand tracks, which is measured through the searches that we have, is the strength which is visible in our ability to gain share on quick commerce as well. So, as long as our brands continue to get stronger, they will continue to also gain share in quick commerce. And we believe that in the long term, you know, Pareto is what will thrive on e-commerce as a format because finally, it's not an unlimited, you know, unlimited physical space play, digital space play, which is what, you know, e-commerce would be. And it is actually a constrained physical space play. And over time, the best velocity per square feet is what the channels will need to get tuned into. And brands which do better will continue to do even better over time. So I think that's what our way is.

Sure. Over time, I do understand. But, you know, at this stage, gaining share, I think compliments to you and your team and wishing you all the best.

Thank you. Thank you.

Thank you. Our next question comes from the line of Vidisha Sheth with Ambit Capital. Please go ahead.

Hi, my first question was on the emerging younger brand portfolio, and this I'm looking at excluding the Dermaco. So, the organic brands or even the inorganic ones, be it the Blunt, Aqualogica, or Dr. Shates, it's been a little challenging to scale those brands beyond the 180, 200 crore ARR. And with even Reginald reaching this similar number of 150 crore ARR, what are the initiatives that you're undertaking to scale up all of these brands to the next level, maybe to a 500 crore ARR?

So I think, you know, the playbook is fairly similar to the playbook that has worked for Mammoth and Dermaco. And it is about finding a differentiated proposition in a category, doubling down on that proposition, and actually gaining share within that category with that proposition. And, you know, different brands go through their own different journeys. Mammoth has gone through its own journey. Dermaco has gone through its own journey. And over time, we need to keep reflecting and contextualizing them versus the consumer and how they are evolving. So each of these brands, the younger brands also, as they grow, we are also recognizing what part of the category portfolio mix, what part of the consumer brand mix is where we are seeing the best rights to win. And once that gets recognized, you invest harder in that sell. And, you know, over time, the brand starts to grow much stronger because of that clarity emergence. So I think each of the brands is in that journey. And we just did packaging as well as proposition rehash for Aqualogica to make it far more relevant for Gen Z's. It's the first brand which is tested on Gen Z's claim. And that has shown very good results in terms of how you're seeing the growth for the brand. Similarly, there are other actions around, we've learned, Dr. Shares, which are planned over the next six to nine months, and you would see those sharpening happening on the brand. So I think in case of Reginald, of course, we had clearly got some underlying low-hanging fruits like expansion onto marketplaces or expansion into other geographies, which we deployed quickly to grow that. And so for each brand, there is a different strategy which gets crafted. And we test that out. And whenever we see green shoots on that, we double down on it. But that's the basic playbook that we execute.

Sure. My second question was on the margin. Now, given that you're already at 12.5% normalized EBITDA margin, and there could be front-ending of the 15% aspiration, but from a long-term basis, how should we think about the balance between growth investment and margin expansion? So at what point of time would you prioritize reinvesting in the younger brands or the brands which are kind of fading out on the growth profile to get that incremental growth?

So, honestly, the plan that we have shared as part of our investor day assumes the prioritization of growth over margins, and the commitment that we have made already takes into account the new categories or the new brands that we want to build. So it's just that, you know, even with that, we know that our core will also continue to grow and the core will continue to become more profitable, allowing us to actually invest in some of these new categories or new brands that we want to build, but overall still be able to deliver to the goals that we have committed. So, the plan that we have shared already assumes that we are going to build young brands into larger franchises. We are going to enter into new categories. So, it takes all of that into account.

Thank you.

Our next question comes from the line of Aditya Soman with CLSA. Please go ahead.

Hi, good evening, and thanks for your opportunity. So thanks for the clarification on sort of the margins on the slide that you have. So just to be sure, about 300 to 350 basis points was sort of organic margin improvement, and then you have another 100 to 150, which is sort of seasonal, which may not recur from 2Q onwards. Is that the right way to look at this number for this year?

I think from a year perspective, like we said, right, I mean, while we're saying over five years, we'll improve by 500 basis points, right, I mean, if you divide it by average, that comes out to be 100, but there'll be years where we'll do better than that, and this is an year where we'll clearly do better than that, and at least 150 basis points plus, right, 150 to 200 basis points is what we see us doing, you know, over last year and this year, right, but yeah, broadly, That's what we think from an ear perspective is how it fits.

Thanks, so that's clear. And secondly, you've had obviously very strong growth in general trade and modern retail. Now, we've had this issue in the past where there was sort of an inventory buildup. I see in your slide you've sort of called out that primary and secondary growth are similar, but how confident are you that you don't see any of this sort of issue as we saw before?

Extremely confident. We are now tracking every distributor's inventory, and our collections are at highest ever levels. Tracking cash is the best way to sort of ensure you're tracking the health of a distribution system. So we do that very clearly. Our distribution system is on less than 30 days of inventory now. And with our kind of wide investment in... Wide assortment, and that's actually very tight to run with, right? But we have been able to sort of achieve that. And all of those factors, in fact, even if you look at retail STRs, our retail STRs are also relatively far healthier than the categories that we operate in. So from all of those angles, we are continuously tracking this and extremely confident that this is being built on a fairly healthy distribution system.

Thanks. Thanks a lot. And that was very clear and very impressive.

Thank you. Our next question comes from the line of Jai Doshi with Kotak. Please go ahead.

Yes, hi, thanks. I have a couple of questions. First one, in terms of, you know, the retail outreach outlet reach of three legs. Is this for Mammard as well as the Dharma Co? And if not, then there is Dharma Co in the journey of offline scale-up. And if you could give some color of, you know, 1000 crore ARR, what is, you know, the split between online and offline ballpark at this point of time for Dharma Co? That's question number one. And the second one is, you know, some thoughts on, you know, we want Sparma acquisition. How do you intend to sort of build, you know, the nutraceuticals business on, you know, that asset and how, you know, ballpark, you know, what should we expect in the next 12 months in that space?

Sure. Hi, Jay. So on the first question, Jay, the 3 lakh is actually the universe that we are reaching out to, according to AC Nielsen. That's largely an intersection of the universe, but largely Mama Earth is what is driving that expansion in terms of distribution. And Dermaco is relatively new in this journey, about an year old into sort of, you know, getting into offline, but has seen very good traction in offline, especially modern trade and now in GT as well. And in general trade, we are already there in close to 50,000 outlets. And from a contribution perspective, from our latest contribution, 80% still online, 20% is coming from offline, which is GT plus MT for Dermaco. Hope is how we are seeing that shape. On your second question, I think Honasa Health is the subsidiary that we have created. We are clearly very strategic, thinking very strategically about this whole space and category. We believe nutrition and wellness is going to be a decadal opportunity. And we will get to create brands which stand for different niches, different kind of payoffs, appealing to different kind of life stages over the next 10 years in that space, which is why we've chosen to sort of, you know, create a separate company around it. Now, within that, we will do different propositions. Fluence is one proposition that we announced where we're still in the condition precedent process and the diligence process, which is getting completed. As it completes is when we will talk about it getting integrated. Thank you.

Is it right to sort of assume that you will probably acquire, you know, some more brands in this space over time as you sort of build a portfolio in nutrition and wellness, or will it be organic from this point?

Like we have always mentioned, our priority is always to find things that we can do organically. And even in this case, you know, the priority will be to build the, you know, the R&D capability to do things organically. We have already sort of hired the right kind of capabilities to actually be able to go after that organically. But of course, if we come across good inorganic opportunities where we are buying not only great brands, but also bolstering our capability in this space as an organization, we will continue to be on the lookout for us.

Sure. Thank you so much. I'll get back in the queue.

Thank you. The next question is from the line of Umang Shah with Banyan Tree Advisors PMS. Please go ahead.

Hi, sir. Thank you for taking my question. Great performance. Sir, my question was, Why has it been that the fragrance as a segment has not been cracked by any of the large players in India? What have been the challenges? And the second part to it was, if my memory serves me right, we had done a foray in fragrances through Mama Earth some time back, and we discontinued it. So what were the learnings from the thing?

Yeah, so let me answer these two questions. Actually, the second question first, and probably that'll answer the first. So, there is a certain world that Marmarth as a brand operates in. There are certain categories where, as a brand, it has the right to win. While when we did our early research, we felt that fragrance was a category where the brand can extend into one. But with early reads that we had with consumers, we were not happy in terms of the PMF we achieved, so we shut down. And those are experiments that we keep doing. But like we have, under Mama, we have not called out that as a core strategy. In fact, none of the brands have that called out as a core strategy, core focus category, because we realized that fragrance brands will need to be fragrance first. And if they want to win in the fine fragrance market in the long term, once you win in fine fragrances market, then of course, your ability to extend into other fragrant categories like, you know, body washes, body lotion, body care actually become relevant. And multiple examples exist globally where brands have been able to do that. But starting with fragrances as the core is essential for you to win in fine fragrance market is what we learned from. That experiment, which is why we have chosen to launch a specific brand which are targeted at, you know, gender-specific fragrances and building brands like that, right? And Ficking is where we are sort of, you know, starting this journey with. It also took us time to build the product capabilities internally, to be honest.

Any category that you want to succeed in, we have clearly learned that our

own strong R&D capabilities, understanding the science of nodes, layering, how do you extend life of fragrances on the skin is also critical. So that's the time that you spend over the last two years after shutting down that category in Marmott and actually building this internally for us. If you look at the, you know, India landscape, then yes, probably you won't come across FNCG companies who have done fragrances because there are no pure play BPC companies that exist here. But if you look at BBC Pure Play companies globally, you look at L'Oreal, you look at Estee Lauder, and fragrances is one of the largest business areas that, you know, they have as a category. And which is, I believe, any Pure Play FMCG company needs to have a strong fragrance play over time. It not only gives them entry into a relevant category, but also builds internal capabilities to do fragrance well in other categories as well. And that's the way we are shaping up.

Understood, understood. Very useful. Second question was, our e-commerce growth was 20%. Can you break it down between our own website versus quick commerce and e-commerce?

Yeah, no, we usually don't give breakdowns of different channels.

Okay, okay. Not a problem. Thank you so much. All the best.

Thank you. Ladies and gentlemen, to ask a question, you may please press star and one on your touchstone telephones. Participants viewing the webcast may enter your question in the ask a question field on the screen. Our next question comes from the line of Nitin Shakhtar with Green Capital Single Family Office. Please go ahead.

Hi, good evening. This is Nitin Shakhtar from the Green Capital Single Family Office. Congratulations to Varun, Ghazal, and Ramanpreet for a stunning performance of a tough quarter. And my question is more related to, you know, in my conversations as an investor with many large FMCG companies that are in personal care, they've indicated a huge hit to their bottom lines in terms of. Either the costs of packaging or the cost of crude oil derivative products or the cost of certain logistics, which has increased over the last quarter, and it's showcasing in the results. Now, I don't see that impact happening in Honasa, so I would just like to understand what has the company done specifically in terms of offsetting the costs. For this quarter, because it seems very impressive that you probably only had an increase of 30, 40 crores rather than anything more than that on the cost of raw materials.

Yeah. Hi, Nitin. Raman, this side. Let me take this one. So I think like you rightly pointed out, of course, I think the crude oil price has been, you know, an inflationary trend given the West Asia war. I think as for other personal care companies, we've also seen, you know, our pricing index for packaging materials specifically going up. And given that we were able to actually do a good job with the inventory management in Q1, we did not see the implication of that. In our financials, as you see it, especially on the gross margin side. And I think the real impact of it will be Q2. But given that we've actually taken calibrated price increases, you know, towards the end of Q1, you know, we'll be able to offset any such inflationary impact on our procurement. So I think that's how we've been able to manage it. I think we don't see, you know, any impact on a gross margin profile, specifically from this one. And hopefully, I think, you know, as we move into the second half of the year, some of these pieces, you know, the mutation trend reverses, and we'll probably see some benefits coming into the P&L.

Okay, that's clear. Thanks a lot. And my second question is, I'm not sure if Gazel is on the call, and maybe one can take this if she's not there. Now, in terms of new categories, which you're obviously looking at as nutraceuticals or fragrances, are you also looking at certain micro trends within a large category? So, for example, there is a trend of lux-maxing for men, and within men in the hair care category, hair fiber brands like Topix are doing large global annual revenue. Would you also sort of look into micro-category niche? Spends product development within the larger category. Is that interesting for the brand? Just wanted to have a sense of innovation in terms of the product development.

Hey, hi. Thank you for that question. I think we keep looking. We do keep looking at all of these trends. The teams are aware. We discuss it internally. But I think we've also aligned on a focus category strategy for the company. There is a lot of weightage given to what is it that we want to build next, where we can create an impact rather than just hopping on to trends.

So through that evaluation,

while we continue to be very, very focused on our course categories that we have defined, there is a lot of experimentation that happens across brands. I mean, you will see brands like Weeblance, etc. trying the new trends, Weeblance, Weeblance, etc. But unless proven, we don't invest big amounts in them.

Okay, understood. It's a very impressive turnaround and extremely great results in spite of a tough quarter. I'm sure your third-party suppliers are getting squeezed by the company, but I'm sure the company is doing a great job on the bottom line, especially in terms of the raw material costs.

All the best.

Thank you.

Our next question comes from the line of Nitin with HDFC Securities. Please go ahead.

Yeah, hi. Thanks for taking my question.

Yeah, so in General Tate, my first question pertains to General Tate.

So like we have seen consistent growth here. So just wanted to understand how is the growth with our old distributors, like whom we have not replaced. So basically this is in the context like what is the growth is or like the new distributors are fixing issues in the newer region. So just wanted to see like how is the like to like growth for Mammoth brand or maybe in the offline where you have the existing distributors.

Actually, most of this growth is from our existing geographies only. So, I mean, existing distributor or new distributor doesn't matter. What matters is, is it the same geography that we are talking about? And as part of new project, in fact, we have further narrowed our direct distribution from like 150 cities to focusing on 100 cities. So all of the growth that you see is coming on the back of that focused distribution strategy. And of course, within those geographies, with our distribution partners, we are expanding to more stores, but it is coming from the same sort of geographies itself.

And would you be able to sort of comment on like how is this GT growth for a brand specific like Mammoth?

Yeah, GT growth for brand Mamarth will also be more than actually, you know, the average growth that we have. It's one of the drivers of brand.

Okay, yeah, that's hard thing to note. Second question is pertaining to your younger brands. If I adjust for this male grooming, how would be the growth? And also, if you can throw some light around, like, how is the performance of Ecologica and how would be the AR currently for that brand?

So, if you remove the BTM Ventures acquisition, the young brands are still growing at 30% plus. We do not further disclose numbers for all the brands, right? Otherwise, we will start getting into, like, pretty detailed and comparatively sensitive information. But Acalogica, like I said, is doing very well, right, especially after the restage and relaunch that we have done in Q1. And we are very confident of being able to continue to scale that brand and make it our next big bet in Anasa.

Thanks a lot. We just wanted to take further on this thing, like if you can

highlight in terms of this proposition, what we have with the ecological, like how overall the consumer cohort, the demand is evolving in that space, not specific to the brand, but specific to the space, if you can highlight.

So Aqualogica is a brand which is targeted at Gen Z, and Gen Z already is becoming almost 45% buying cohort in, you know, BBC categories, especially in e-commerce channels. And that's where the brand is completely focused on and will continue to focus to be. So, I think we're very confident that given the sharpness of the brand and the relevance of that TG as a buying cohort in the long term, that's what we are betting the brand on.

Sure. Thanks a lot and all the very best.

Thank you. Our next question is from the line of Jay Doshiv with Kotap. Please go ahead.

It's a follow-up opportunity. First question is on Mama Earth. Is the growth well-balanced across online and offline channels or a channel or is it largely driven by offline channel only?

Both are strong double digits.

Thanks. Thank you. Second is, can you sort of talk a little bit about, you know, I know there is a slide, but rosemary, you know, shampoo as well as rice. You know, rice water face wash. You know, these are products that have been around for a while. Are there any other new products which probably have not crossed 50 crore ARR, but where do you think, you know, can drive the next leg of growth for Mama Earth, which, you know, early success gives you confidence that, you know, some of those products could be 50 crore, 100 crore ARR. Anything in the last six months or nine months that has been successful that you're launching under Mama Earth?

Yeah. Firstly, Jay, I think, you know, for us, rice as a franchise itself can become a 500 crore franchise is what we believe, right? Rosemary as a shampoo franchise itself can become a 250 crore franchise. So these franchisees, given the partitions and categories that they operate in themselves, have a long way to go in terms of the market share that they can gain. They both remain at single-digit market shares as sort of, you know, franchises. So there is a lot more headroom there. But from a new things perspective, the three, four things that I will talk about, and again, moisturizers is something that we're trying to build in Plum Earth, and that's sort of, you know, now getting into that stage where it is close to that 50-gros ARR, we're very confident of how we'll execute that in winter. Our sunscreens, vitamin D, DLAC, or glow sunscreen is something which we saw do really well in this summer. So that's another candidate for becoming the next 100 crore sort of, you know, yeast. And we've also, in our core categories of face wash and shampoo, open newer partitions. And while they're younger, but we are very confident in the medium term, we'll see them becoming also 100 crore franchisees over the next two to three years. One is in acne, where we have tea tree face wash. So, we are doing our first two different partitions, which are the next engines of growth. And the core continues to have a long way to go in terms of how large it can be.

Understood. The next question is for Raman. So, usually this quarter is 110 crore EBITDA, and if I exclude the one-time component, it's close to 100 crores. In the past, what we have seen is, you know, probably 2Q is similar to 1Q or slightly lower, but then second half quarterly EBITDA generally tends to be much higher. So, you know, in that context, you know, the guidance that you've given, you know, both in terms of margins as well as probably growth or EBITDA growth seems to be a little too conservative. So, what am I missing? Are you seeing any risk or is there any sort of, you know, other, you know, is there any phasing of ANP spends that? You know, you're expecting during the course of the year. Can you explain, you know, the margin guidance a little better?

Yeah. So, I think, Jai, you know, as you, you know, I think Q1, adjusting for the one-time non-recording piece, the numbers come around to 12% and, of course, like, you know, we were talking about earlier, there is clearly a seasonal, you know, leverage also as part of this. And now as we move ahead, you know, typically Q2, there is a Q1 seasonality, the summer category seasonality goes away, and then sequentially the scale kind of dips a little. Having said that, of course, you know, like we've said in the past, you know, our... Focus is growth first. I think mindset is clearly growth first. And hence, I think if there are opportunities for us where we'll have to reinvest and target growth, I think that's how we will approach the rest of the year. And hence, you know, our focus is to ensure that the growth continues and sustains. And it's more about, you know, how the margin profile needs to, you know, we are looking at a four to five year ambition from a margin profile perspective. And, you know, like Varun said, you know, 100 to 150 pips is what we target. And, you know, if there is anything that we need to reinvest to fuel the growth and make the business more sustainable from a long-term perspective, we continue to do that. And hence, you know, that's how we will sort of approach the rest of the year.

Thank you so much. Congratulations and good performance, and wish you the best for the year.

Thank you.

Thank you. Participants, to ask a question, you may please press star and one at this time. Those watching the webcast may enter their text question in the ask question field below the screen. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Thank you so much, everyone, for dialing in. We look forward to meeting you again in the next quarter results. Thank you.

Thank you. On behalf of Honasa Consumer Limited, that concludes this conference.

Thank you all for joining us.

You may now disconnect your lines.