Honasa Consumer Ltd Management Discussions

Introduction

Honasa Consumer Limited (Honasa) is Indias largest digital-first beauty and personal care company, with a diversified portfolio of brands offering differentiated propositions to cater to distinct consumer needs. Over the years, the Company has built a ‘House of Brands architecture with a portfolio of seven brands. With the success of Mamaearth, the Company has developed repeatable brand-building playbooks that have enabled it to scale newer brands at a fast pace. These playbooks are powered by a consumer-centric approach across various aspects of the business model, including innovation engine, digital-first omnichannel distribution, and technology- and data-driven marketing and consumer engagement.

Indian Economy

During FY 23-24, the Indian economy demonstrated robust growth, expanding by 8.2%. Across various sectors, encouraging indicators highlighted resilience and optimism, supported by quantitative data. Consumer confidence, gauged through the RBIs household survey surged, reflecting increasing positivity among households. Enterprises echoed this sentiment, reporting favourable business conditions, heightened production levels, enhanced capacity utilisation, and improved employment outlooks.

The workforce dynamics in India are also shifting significantly. The State of Working India Report 2023 highlights that younger, more educated women are entering the workforce in greater numbers, reducing gender disparities in employment. The rise in salaried employment among women and the decline in informal wage work are narrowing the gender gap in earnings.

India currently has 820 Million+ active internet users. More than half of them (442 Million) originate from rural areas of the country.

The widespread availability of affordable internet access has significantly contributed to Indias GDP growth by connecting more Indians to the digital world and fostering digital literacy and entrepreneurship. As the digital economy is projected to reach $1 Trillion by 2025, sectors such as e-commerce, fintech, and digital entertainment are driving this expansion. Increased smartphone adoption, improved internet connectivity, and supportive government initiatives promoting digital services propel growth in these sectors.

$1 Tn

Estimated Size of Indias Digital Economy by 2025

The rise of digital payments, mobile wallets, and the Unified Payments Interface (UPI) has revolutionised financial transactions in India, promoting financial inclusion and innovation. This digital transformation has enabled more people to participate in the formal economy, increased transaction efficiency, and reduced financial service costs. Increased internet penetration and the thriving digital economy have created substantial opportunities for economic growth across various sectors. E-commerce platforms provide businesses with access to a larger customer base; fintech innovations offer better financial solutions; ed-tech enhances educational opportunities; and health-tech improves healthcare delivery. Digital entertainment has also emerged as a significant contributor to the economy, attracting investments and creating jobs. Overall, the digital revolution in India is enhancing productivity and efficiency, creating new markets and opportunities, and playing a crucial role in boosting the countrys GDP growth.

Outlook

The Reserve Bank has maintained its GDP growth forecast at 7.2% for FY 24-25, indicating continued robust economic performance. Looking ahead, India shows the potential to become the worlds third-largest economy by 2030. Several transformative factors are contributing to this optimistic outlook. Rapid urbanisation is reshaping the countrys landscape, driving infrastructure development, and increasing the demand for goods and services. The expanding aspirational middle class further propels consumption and investment across various sectors. Additionally, the rising participation of women in the workforce is enhancing productivity and economic diversity. The proliferation of smartphones and internet connectivity is accelerating digital inclusion and literacy, creating new growth opportunities. E-commerce platforms and digital payment systems are facilitating convenient shopping experiences and stimulating consumer spending. Furthermore, the increased availability of credit facilities is empowering individuals and businesses to invest, innovate, and expand. Together, these dynamics are fostering a vibrant economic environment, positioning India as a key player in the global economy.

The size of the Indian economy will cross $4 Trillion in 2024-25, and the per capita nominal GDP will also cross $2,800, according to an estimate undertaken by the industry organisation, PHD Chamber of Commerce and Industry.

Indian Retail Market

India is a large and fast-rising retail market. According to Redseer, the Indian Retail market is expected to increase at 10% between 2022 and 2027, rising from $891 Billion in 2022 to more than $1.4 Trillion in 2027. This growth was driven by several key sectors within the industry including favourable demographics, rising incomes, changes in customer choices and preferences, etc.

$1.4 Tn

Size of Indian Retail Industry by 2027*

By retail formats, the modern trade segment, including hypermarkets, supermarkets, and convenience stores, secured a 7% market share while traditional trade, represented by Kirana stores and small independent retailers, retained a substantial 18% market share**, emphasising the enduring significance of these traditional retail formats in India. Overall, the Indian retail industrys robust growth across diverse sectors underscores the nations evolving consumer landscape, driven by changing lifestyles, rising incomes, and technological advancements.

Indian FMCG Market

The fast-moving consumer goods (FMCG) business is Indias fourth-largest sector and has been growing at a steady rate over the years due to rising disposable income, a growing young population, lifestyle changes, increased awareness, and growth in e-commerce platforms. As per Markets Research Futures Study, the FMCG industry is expected to increase from $121.8 Billion in 2023 to $230.6 Billion by 2032, with a CAGR of 8.3% from 2024-2032. It is divided into three major segments including household and personal care (50%), healthcare (31%) and food and beverages (19%).

Indian BPC Market

A report by Redseer predicts that Indias BPC market will experience one of the fastest growth rates of 11% CAGR between 2022 and 2027 in the industry, reaching $33 Billion ( 2.5 Lakh Crores) by 2027. The number of online BPC users will grow from 67 Million in 2022 to 150 million+ in 2027, marking over a 2x rise.

$33 Bn

Indian BPC Market by 2027

In this category, India has seen a significant surge in consumer spending and market growth, as indicated by data from Kantar Worldpanel and Redseer. An average Indian spends 1,214 on beauty and personal care (BPC) products over six months, with working women spending 1,942. This expenditure is significantly lower compared to Chinas 3,172 and Indonesias 2,436 for the same period.

1,214

Average Spending on BPC Products in India Over 6 Months

The BPC market in India is undergoing a major transformation due to the convergence of technology, demographic dividends, and growing consumer aspirations. It is expected to grow at one of the fastest rates amongst the FMCG categories. With incomes rising, the BPC industry is expected to follow an S-curve denoting that the industry in India is at a critical inflection point as observed in other emerging markets as well.

The diversity within the BPC market is vast, encompassing various sub-segments such as hair care, oral care, bath & shower, skincare, makeup & cosmetics, and fragrance, catering to men, women, and children. This diversification has fuelled a significant increase in the number of BPC brands. The category mix has been evolving with growth to be led by categories such as face care and makeup, expected to contribute 18% and 10% of the market by 2027.

Factors Impacting the Growth of Indias BPC Market

Rising Incomes: As disposable incomes increase across urban and rural areas; consumers are spending more towards beauty and skincare products. This demographic transition is not only broadening the consumer base but also increasing demand for driving demand for premium and specialised beauty products.

Rapidly Rising Middle Class: As incomes rise, there is notable upward mobility, with lower-income households increasingly transitioning to the middle class. As per Redseer, middle-class households have a per capita consumption expenditure more than 3x that of low-income households. Their consumption patterns are more inclined towards branded products and organised channels compared to lower-income households. While the middle class constitutes the largest segment of the population, high and upper middle-class households are expected to grow the fastest at an annual rate of 14% from 2022 to 2027. By 2027, middle-class and high-income households are projected to account for over 90% of private consumption as per Redseer, leading to expanded addressable markets for branded players.

Source: Redseer

Note: The above % figures in each circle denote contribution of each segment to Indian Population (Households)

Urbanisation: Because the urban population frequently has higher discretionary resources and is more exposed to global beauty trends, there is a growing demand for a varied range of beauty and personal care products that cater to different preferences and demands.

36%

Urbanisation as a % of Population (2022)

Womens Increasing Participation in the Workforce: As more women enter professional spheres, there is a growing emphasis on personal grooming and self-care. This demographic shift has spurred demand for skincare, hair care, and cosmetics tailored to busy lifestyles and professional settings. Further growth potential is to be unlocked with the increased participation of women in the labour force, particularly in services.

Consumer Trends in the BPC Market Early 2000s

• Lack of Awareness about Ingredients: Consumers were largely unaware of the widespread impact of ingredients used in beauty and personal care products

• Exposure Largely Limited to General-use Products: Consumers typically used shampoos, face washes, and other products without expecting them to address their specific personal needs or to be tailored specifically for them

• Influenced by Mainstream Celebrities: Makeup trends were predominantly shaped by the mainstream pop culture and the most popular celebrities of those times

2010 Onwards

• Awareness Driven by Social Media and Influencer Marketing: Platforms like Instagram and YouTube have become pivotal in shaping consumer preferences, with influencers playing a key role in educating and engaging audiences. These digital influencers offer reviews, tutorials, and personal stories, making beauty trends more accessible and relatable

• Strong Demand for Sustainable and Clean Products:

Increasing awareness of health and environmental concerns has led consumers to seek natural, organic, and ethically produced alternatives, reflecting a growing preference for sustainability and cruelty-free practices

• Beauty Perceptions Changing with Consumers Caring about Inclusive Beauty: Consumers are increasingly valuing diversity and representation in the BPC industry, advocating products and campaigns that cater to all skin tones and skin types

• Openness to New Regimes, Beauty Practices, and Ingredients: Consumers are increasingly exploring innovative skincare routines, holistic wellness approaches, and novel ingredients, blending traditional wisdom with modern science

• GenZ Influence: GenZ is exerting a profound influence on the BPC landscape in India, driving trends with their unique preferences and being digital-savvy. This generation values authenticity, inclusivity, and sustainability, pushing brands to align with these ideals

• Gender-neutral Brands: Brands reflect a shift towards inclusivity and breaking traditional gender norms. They cater to all genders, offering products emphasising on individuality and self-expression over conventional gender-based marketing

• Premiumisation: With the rising disposable incomes and demand for personalised, high-quality items, there has been increasing focus on expanding masstige and premium product lines

• Evolving Category Mix: Brands are investing in educating consumers about comprehensive skincare routines and the categories like face care and makeup are leasing the growth of the industry

• Emergence of New Need Spaces/Propositions: There is an increasing need felt by brands to introduce targeted, need-based products (e.g., paraben-free, sulfate-free) vs generic products responding quickly to evolving consumer preferences

• Increasing Contribution from Beyond Metros: Brands need to cater to rising aspirational spending in Tier 2+ cities and towns and educate these consumers in non-metro cities about BPC products. There is also the focus on expanding distribution through modern retail and e-commerce channels

Evolved Consumer Behaviour

Seeking ‘Made For Them Products

Consumers prefer clean ingredients, thus appreciating brands that are environmentally safe and cruelty-free. They appreciate inclusive offerings and seek products tailored to their specific skin types that do not cause any side effects.

Exploring Various Shopping Avenues

While consumers become aware of products by talking to friends, family, beauticians, etc., or by coming across online or offline advertisements, they use online sources to understand more, eventually making their purchase either online or offline.

Willing to Pay Premium for What Works

In India, masstige is growing twice as fast as the mass market, while premium is expected to grow at a CAGR of 12%, higher than in the United States or China.

Players exclusively focused on BPC can adapt more effectively to changing consumer needs and are poised to succeed in the market.

Pureplay BPC Players

Players focus only on beauty and personal care categories. Typically, have been at the forefront of capturing evolving BPC trends and needs.

FMCG-led BPC Players

Players operating in multiple FMCG categories, including beauty and personal care. Typically, have operated with mass-distribution-based popular propositions.

Why are Pureplay BPC Players Better Placed to Address these Changing Consumer Needs

Sharper value propositions

Faster executions

Higher pricing power for specialised and effective products

Efficiency in reaching consumers through multiple channels

Superior online engagement and brand salience

Intent focus on educating consumers through the right mediums

Higher marketing spending leveraging higher gross margins

Honasa is at the Forefront of Capturing Fast-evolving Consumer Imagination

Born in 2016, Honasa has emerged as a trailblazing digitally native pure-play beauty and personal care (BPC) company, focusing on the needs of Indian consumers through its differentiated brand-building model. Over the years, the Company has strategically invested to craft a distinct journey of brand discovery and experience, resulting in a formidable House of Brands.

‘House of Brands: With a diversified portfolio of seven brands spanning various segments, including face care, body care and personal wash, hair care, suncare, colour cosmetics, fragrances, and baby care, Honasa has been able to build a ‘House of Brands. The success of their flagship brand, Mamaearth, has enabled the development of repeatable brand-building playbooks, allowing them to curate, launch, and scale newer brands. These playbooks are driven by a consumer-centric approach, encompassing innovation, digital-first omnichannel distribution, data-driven marketing, and technology-led consumer engagement.

Innovation: Product innovation continues to be one of the moats for the Company. It has developed multiple tools and capabilities to quickly identify emerging consumer needs and address them effectively through innovative products, formats, ingredients, and brand propositions. An in-house innovation team, led by co-founder and Chief Innovation Officer Ghazal Alagh, spearheads the development of new products. This team works end-to-end on new product launches, from ideation and concept development to formulation, clinical trials, stability and sample testing, quality assurance, packaging, pricing, and positioning. The team operates from dedicated innovation centres in Gurugram and Thane, formulating products focused on Indian consumers. As needed, the team taps into the research and development resources of large third-party ingredient suppliers to consistently produce unique products based on deep consumer insights.

Omnichannel Distribution: Honasas route-to-market strategy works towards ensuring that the Company is available wherever the consumers choose to shop, and thus, consumers are reached through both online and offline touchpoints with the omnichannel network. This has enabled Honasa to scale its presence in both online and offline channels, making it distinct from other operators in the industry.

Purpose-led Brand-building: The Company believes in building ‘Why-based brands (brands with a purpose) versus only ‘What-based brands (brands focusing on purely functional benefits). Honasa brands, with their association with environmental and social causes, foster trust, brand resonance, and affinity with consumers. This integrated approach ensures that Honasa remains at the forefront of the BPC industry, consistently delivering value to consumers.

Each brand in the portfolio has a differentiated value proposition enabling the company to acquire new users with distinct needs and preferences and increase share of wallet from existing consumers

Mamaearth – By tapping into the rich heritage of Indian natural remedies, Mamaearth creates products that resonate with consumers seeking authentic, nature-inspired solutions. During the year, a host of innovative products were launched in multiple categories and ranges under the brand Mamaearth, including Mutani Mitti face care range with face wash and face pack, Beetroot face care range including face wash and sunscreen, Rosemary and Hibiscus Hair Care Range including shampoo, conditioner and hair oil, reiterating the importance of innovation as one of the engines of growth for the Company.

Mamaearth continued to expand its offline footprint. As per Nielsens Retail Measurement System, the brand retailed its products through 1,88,377 FMCG retail outlets in India as of Mar24, improving its distribution by 34% YoY. The value market share across key categories like face wash and shampoo witnessed a YoY improvement of 120 bps and 40 bps, respectively. The brand also strengthened the counter-share at the retailers signified by improving Share Amongst Handlers, witnessing an uptick of 148 bps and 65 bps YoY in the face wash and shampoo categories, respectively. The brand struck a chord with the customers with ad campaigns rooted in the concept of ‘Goodness Makes You Beautiful. It witnessed growing household penetration of +290 bps and +110 bps in the face wash and shampoo categories as per Kantar Household Moving Annual Total % penetration as of December 2023 vs. December 2021, thus suggesting a stronger connection between the brand and the consumers. According to Redseer, as of the FY 22-23, Mamaearth emerged as the fastest-growing BPC brand in India to reach an annual revenue of 10 Billion (in the preceding 12 months) within six years of launch. Also, the brand quickly rose to prominence, becoming one of the top 15 beauty and personal care (BPC) brands in 2022 in terms of retail spending, according to Euromonitor. It continued this streak, growing 3x faster than the other top 14 BPC brands in terms of GMV in CY 23.

Intending to tackle deforestation and bring income opportunities, under the ‘Plant Goodness initiative, Mamaearth planted more than 6,00,000+ trees since inception with every order. The initiative expects a yield of 12,000+ tonnes of fruit per season giving a revenue potential of 20 Crores per annum for the farmers.

The Derma Co. – Identifying the relevance of active ingredients for Indian consumers at a very nascent stage, The Derma Co. was launched in 2020 to provide science-backed skincare through a range of potent active ingredients. Being one of the first brands in the space of active ingredients-led beauty, and harnessing data-led insights, it developed categories like sun care, face cleansers, moisturisers and face serums through active ingredients. The brand pioneered ingredients like Kojic acid, Niacinamide, Hyaluronic acid, Salicylic acid through its offerings while also launching products with a combination of two ingredients under its ‘Power of 2 campaign. The brand also launched breakthrough innovations in formats like sunscreen sticks and mineral powder sunscreen.

So far, the brand has been built primarily online, with its products becoming bestsellers on key e-commerce platforms. Offline expansion provides further opportunities for growing the brand. The Derma Co. reached an Net Annual Revenue Run-rate (ARR) of 500 Crores+ while being profitable throughout the year. Expert/dermatologist-led scientific communication has enabled the brand to gain prominence amongst millennial users, as such content proves informative and contextualised to their needs and preferences. This can be demonstrated through its growing brand searches on online platforms.

Under the ‘Young Scientists programme, the brand supports science education for underprivileged students, bridging the gap between theory and practical application. This initiative empowered 20,000+ children from underserved communities in 76 schools in Bengaluru and Chennai leading to a 42% increase in assessment scores post-intervention.

Aqualogica – Leveraging the science of hydration, Aqualogica continued to scale, becoming the fastest, amongst Honasa brands, to scale an 180 Crores Net Revenue Run-rate (ARR) in 18 months. With hydration delivered through lightweight textured products for the Indian tropical climate and products like glow+ dewy sunscreen, detan+ dewy sunscreen, illuminate+ oil-free moisturiser, and plump+ pouty lip gloss gaining traction, the brand is very well placed in fast-growing categories like sunscreen across all major e-commerce platforms. Currently, the distribution of the brand is predominantly online, with the products being retailed through its website as well as leading e-commerce platforms. With its vibrant and encaptivating content, Aqualogica strikes a chord with its GenZ consumers, amassing notable engagement for its social media content, leading to a 2.5X increase in Google searches between March 2023 and March 2024 as per Google Adwords. The ‘Aqualogica sunscreen became one of the most searched-for branded keywords on Google in the sunscreen category during the year.

Aqualogicas commitment to providing access to potable water through its ‘Fresh Water for All initiative has ensured clean and safe drinking water reaches remote parts of India, impacting 500+ households in Chhattisgarh and Madhya Pradesh and saving 400+ hours for women daily, allowing them to use that time for earning income, childcare, and household work.

BBLUNT – In 2022, Honasa acquired BBLUNT, making its foray into hair colour and hair styling. With its hair-care portfolio focusing on the ‘shine proposition and styling portfolio performing well during the year, the brand exhibited a strong growth trajectory, with the product business scaling up over 3x since its acquisition. Innovative products like Intense Moisture Heat Hair Spa Mask and Hot Shot Hold Spray achieved substantial traction during the year.

As a digital-first brand targeting millennials, the Company has established a robust presence on leading marketplaces and D2C websites. Leveraging the network of 15 salons to strengthen brand equity, the brand has delivered disruptive growth. With effective campaigns like ‘Be Bold, BBLUNT, brand searches surged during the year. In the styling category, BBLUNT became one of the market leaders in online channels. Through the ‘Shine Academy, BBLUNT has been able to empower 10,000+ women from underprivileged communities across 11 states.

Ayuga – The brand is based on the proposition of powerful and effective ingredients that give faster results. Each natural ingredient is carefully sourced from places where it grows in its most potent form. With the Kashmiri Saffron and Jasmine range launched in December 2023, the brand currently operates primarily in sub-categories like moisturiser, sunscreen, face wash, face mask, and face oil.

Staze – An aspirational colour cosmetics brand for GenZ, Staze, is a pioneering range of high-performance, long-lasting makeup, driven by advanced C-Lock Technology™. Each product has been carefully crafted with the functional expertise of 40+ beauty experts, spanning beauty product specialists, dermatologists, influencers, and makeup artists, to deliver studio-finish makeup that suits all Indian skin tones and skin types. Within a few months of launch, the brand is being built online on its D2C and key e-commerce platforms.

Dr. Sheths – With unique formulations to suit Indian skincare needs and blending potent active ingredients backed by science with the goodness of natural botanical ingredients, Dr. Sheths has scaled over 30x since its acquisition, achieving an Net Annual Revenue Run-rate (ARR) of 150 Crores. Ranges with Natural and active ingredient combinations including Ceramide & Vitamin C, Haldi & Hyaluronic have been instrumental in the brands scaleup. Newer ranges like Gulab & Glycolic and Kesar & Kojic have also made a substantial contribution to the brands outstanding performance in FY 23-24.

With bestsellers in categories like sunscreen and moisturiser, the brand witnessed a 241% increase in Google searches (March 2023 vs. March 2024), thus experiencing strong success online.

Aimed at fostering a positive change in the rural healthcare landscape, Dr. Sheths ‘Healthy India Initiative, in partnership with Doctors for You (DFY) is providing a clinic on wheels facilitating doctor consultation and medicines to various villages starting with Bihar.

Competitive Strengths and Key Differentiators

While building Mamaearth and scaling other brands, the Company has built key strengths to solve consumer needs better and support the brand-building model.

Consumer-centric Product Innovation

Innovation is at the heart of Honasa, focusing on creating innovative products that meet the needs of Indian consumers. Therefore, the ability to innovate and launch products, when there exists a consumer need, has become a key differentiator for the Company.

The Company launched 122 new products in CY 23, contributing 18% to the overall revenue from operations in the period FY 23-24.

The Company has created a suite of tools and capabilities that allow it to engage with consumers and gain insights into new and emerging beauty trends in India. The consumer insights-driven product innovation engine is a core competence, that enables the Company to conceptualise and develop new brand concepts, products, and ingredient ranges.

A specialised in-house innovation team comprising 56 members as of March 31, 2024, is tasked with overseeing the entire process from ideation to the launch of new products. The Company also strengthened its R&D and product development expertise by acquiring Cosmogenesis Labs. The acquisition, through its founder, brings in a wealth of experience of crafting 5,000+ formulations, which will bolster its R&D capabilities.

Digital-first Omnichannel Distribution

The products of the Company are available across online and offline consumer touchpoints through its omnichannel distribution network, ensuring presence wherever the consumers prefer to shop, enhancing their convenience and accessibility.

Online Channel

The Companys online channel includes direct-to-consumer (D2C) platforms (encompassing brand-specific websites, mobile sites, and mobile applications) and major e-commerce market-places, including vertical BPC-focused market-places, horizontal, multi-category market-places, and emerging platforms like Quick Commerce. Through its online channel, the Company catered to 97%+ of overall pin codes during FY 23-24. Over 56% of units purchased were from Tier-2 or below cities, aided by some e-commerce platforms that have higher penetration in these markets. The Company used its D2C platforms to drive trials among early adopters for all new product launches and early-stage brands.

8.7 Mn

Unique Transacting Users*

With its ‘House of Brands offering distinct propositions in fast-evolving categories, Honasa continued to disrupt especially in the online channel. For e.g., in sunscreens, by internal estimates, the Companys brands command 30%+ market share on online channels.

In FY 23-24, the company strengthened its position on e-commerce platforms. This performance was further aided by enhancing presence on platforms with stronger presence in lower pop-strata towns. Additionally, rapid growth was seen in emerging channels, with Quick Commerce emerging as one of the fastest-growing channels.

Offline Channel

The Company has created a scaled-up offline presence driven through both General Trade and Modern Trade, enhancing consumer access and broadening reach. The growth is evident with increasing value market share gains across key categories.

Mamaearths offline presence continues to grow with presence across 1,88,377 FMCG retail* outlets across general trade and modern trade formats as of March 2024, this marks a significant increase in distribution penetration of 34% YoY. The brand also witnessed increasing counter-share at retail outlets marked by increasing Share

Amongst Handlers* by 148 bps and 65 bps over last year for shampoo and face wash respectively. The Brands modern trade outlet penetration grew to 8,000+ stores present across 30+ modern trade chains including 5,000+ stores of Apollo Pharmacy and 1,000+ stores of Reliance Retails Smart Bazaar. As of March 2024, the brand has 111 Exclusive Brand Outlets (EBOs) which help strengthen equity for all brands in a retail environment by enabling a more personalised customer experience. A network of 600+ distributors, super distributors, and sub-stockists continues to be instrumental in serving the offline outlets.

To further strengthen and make general trade channel more efficient and future ready, it is being transitioned to a stronger direct distribution model. This helps the brand to forge long-term partnerships with better quality distributors and bring cost efficiencies. As part of the process, the brand is also Implementing DMS-SFA across the value chain for enhanced controls and strong in-market execution

Consumer-focused Brand-building and Engagement

The Companys brand-building activates consumer engagement initiatives across various media platforms and channels. By employing digital and traditional marketing, the Company conveys a cohesive narrative about its brands and offerings across all relevant customer touchpoints. This is evident from increasing online search volumes across brands and strengthening household penetration across key categories.

Honasas comprehensive marketing strategy engages with users throughout the entire marketing funnel, from creating awareness to driving consideration and conversion for the brands. The Company has built a robust influencer community on social media, using in-house tools to engage thousands of influencers and enhance brand awareness. By producing customised, engaging content through its in-house studio and influencer network, Honasa addresses nano-marketing funnels and micro-cohorts, delivering a personalised user experience tailored to consumers specific needs and preferences. The Company aims to create purpose-driven brands that serve appropriate communities, as well as provide content that is relevant to its consumers.

Purpose-led Brand-building

Central to the Companys marketing strategy is purpose-driven brand building. Honasa prioritises creating brands that deeply resonate with consumers, highlighting values like sustainability, safety, and efficacy. Additionally, the Company communicates the impact of these environmental or social impact initiatives. Please refer to the ESG section to glance through the purpose associated with each brand.

Beautiful Indians: Moving into the 3rd season, Beautiful Indians celebrate individuals from various walks of life who contribute to the world through their kindness.

Aao Banaye Diwali Beautiful: The campaign portrays instances where individuals spread joy through acts of kindness during Diwali.

Content-focused

Recognising millennials preference for meaningful content, the Company crafts informative messaging using extensive consumer insights to create compelling and relevant content that resonates with its audience.

Mamaearth Shadi Wala Glow Ubtan Campaign: Picking up from the age old tradition of the goodness of Ubtan that is applied during the haldi ceremony at weddings, the campaign talks about a similar glow through Ubtan face wash.

The Derma Co. Sali-Cinamide – Power of Two Serums Campaign: This 2-in-1 range tackles both acne & acne marks without the need of multiple products.

Dr. Sheths Ceramide & Vitamin C Sunscreen Campaign: A one step solution for Sun protected brighter skin, that fades tan and reduces dark spots.

Mamaearth Onion shampoo Campaign: This campaign emphasises that onion shampoo is Indias No. 1 shampoo and reduces hair fall by up to 90%.

Aqualogica Glow+ Sunscreen Campaign: Demonstrating that suncare should be fun, this campaign emphasises about it being one stop solution for sun protection while giving a beautiful glow.

BBLUNT Hairfall Control Campaign: The campaign talks about Bblunt Hair Fall Control Shampoo reducing hair fall by 93%.

Community

The Company has established a strong influencer community across various social media platforms to enhance brand awareness.

2,700+

Influencers Engaged across Brands in FY 23-24

This extensive network enables the Company to broaden its reach, promoting trust and authenticity amongst consumers.

Review of Consolidated Financial Statements

Particulars	FY 23-24	FY 22-23	YoY Growth
	(Rs. Mn)	(Rs. Mn)	(%)
Revenue from Operations	19,199.04	14,927.48	28.6%
Sale of Products	18,815.24	14,255.12	33.0%
Sale of Services	383.8	672.36	(42.9%)
Cost of Goods Sold	5,807.28	4,467.32
GROSS PROFIT	13,391.76	10,460.15	28.03%
GROSS PROFIT Margin %	69.8%	70.1%
Employee Benefit Expense	1,705.63	1,648.80	3.5%
% of Revenue	8.9%	11.00%
Advertisement Expense	6,612.80	5,302.78	24.7%
% of Revenue	34.4%	35.50%
Other Expense	3,702.46	3,280.93	12.8%
% of Revenue	19.3%	22.00%
EBITDA	1,370.87	227.64	502.2%
EBITDA Margin %	7.1%	1.50%
Depreciation and Amortisation	306.17	249.64
Finance Costs	90.41	66.63
Other Income	497.01	225.20	120.7%
PROFIT BEFORE EXCEPTIONAL ITEMS	1,471.30	136.57
Impairment Loss		(1,546.97)
Profit Before Tax	1,471.30	(1,410.40)
PBT Margin %	7.7%	(9.4%)
Tax Expenses	366.02	99.26
Current Tax	368.01	171.78
Deferred Tax (credit)	(1.99)	(72.52)
Profit After Tax	1,105.28	(1,509.66)
PAT Margin %	5.8%	(10.1%)

Revenue from Operations

Revenue from operations increased by 28.62% to 19,199.04 Million in FY 23-24 from 14,927.48 Million in FY 22-23.

The increase is primarily due to an increase in the sale of products by 31.99% to 18,815.24 Million in FY 23-24 from 14,255.12 Million in FY 22-23. Honasa delivered an underlying volume growth of 41% in FY 23-24, marking a volume-led growth.

The increase was due to an increase in demand and sales of products across the brand portfolio. While Mamaearth, the flagship brand, contributed most of the Companys revenue from operations, the scaling up of newer brands also contributed substantial growth during FY 23-24 led by The Derma Co. While the online channel contributed 65% of revenue, offline channel contributed 35% of the revenue for FY 23-24.

Also, in FY 23-24, Honasa introduced 122 new products (across all the brands) in the BPC market in India, contributing 18% in revenue from operations during FY 23-24. The service business which includes BBLUNT Salon business and Just4kids service business, decreased to 383.80 million in FY 23-24 from 672.36 million in FY 22-23 due to scaling down of Just4kids business, which was impaired in FY 22-23.

Cost of Goods Sold and Gross Profit

Cost of goods sold increased to 5,807.28 Million in FY 23-24 from 4,467.33 Million in FY 22-23, the increase was in line with the increase in sales of products during FY 23-24. The Companys Gross Profit stood at 69.8% in FY 23-24 as compared to 70.1% in FY 22-23. Excluding the impact of the Just4kids business in the base year, which was scaled down and impaired in FY 22-23, the Gross Profit margin improved by 37 bps due to efficiencies in procurement and higher contributions from offline channels to overall business.

Employee Benefits Expense

Honasas employee benefits expense increased by 3.45% in absolute terms to 1,705.63 Million (8.9% of revenue) in FY 23-24 from 1,648.80 Million (11% of revenue) in FY 22-23, an improvement of 220 bps in employee benefit expenses as a % of revenue YoY. Excluding the impact of the scaled-down and impaired business of Just4kids in the base year, which was primarily a service-led business with payroll contributing to most expenses, the employee benefit expenses increased by 25.6% YoY. The absolute increase is primarily due to an annual increase in salaries, wages, and bonuses in FY 23-24 in line with the business plan, including further strengthening the organisations capabilities across key functions and hiring resources for strengthening the offline organisation. During the year the Company also enhanced its front-line salesforce for offline operations as well as the exclusive brand outlets (EBO) team as they opened new stores during the year.

Advertisement Expense

The Companys advertisement expenses increased by 24.7% in absolute terms to 6,612.80 Million (34.4% of revenue) in FY 23-24, as compared to 5,302.78 Million (35.5% of revenue) for the FY 22-23, as it focuses on investing and increasing awareness for all its brands to gain market share and increase household penetration across key categories. The Company saw an improvement of 108 basis points in its advertisement expenses YoY, as a % of revenue, as it continues to focus on improving efficiencies across its marketing investments while scaling brands.

Other Expenses

Honasas other expenses increased by 12.8% in absolute terms to 3,702.46 Million (19.3% of revenue) in FY 23-24 from 3,280.93 Million (22.0% of revenue) in FY 22-23, an improvement of 270 basis points as a % of revenue YoY. This improvement is due to building leverage across supply chain costs and other overheads and scaling down of business of Just4kids which was impaired in FY 22-23.

EBITDA

EBITDA for FY 23-24 stood at 1,370.87 Million (7.1% of revenue) as compared to 227.64 Million (1.5% of revenue), showcasing a margin improvement of 562 basis points (bps). Excluding the impact of the scaled-down and impaired business of Just4kids in the base year, the EBITDA margins for FY 23-24 stood at 7.2% vs for FY 22-23 at 3.1% (an improvement of 419 basis points) led by higher scale and improving efficiencies and operating leverage across key P&L levers.

Depreciation and Amortisation Expense

Our depreciation and amortisation expenses increased by 22.64% in absolute terms to 306.17 Million in FY 23-24 from 249.64 Million in FY 22-23. The increase in the depreciation of right-of-use-assets was mainly on account of new leases for EBOs and the new corporate office, partially offset by the decrease in the amortisation of intangible assets, which was primarily on account of impairment of the carrying value of trademark and software related to Just4kids during the FY 22-23.

Finance Costs

Finance costs increased by 35.69% to 90.41 Million in FY 23-24 from 66.63 Million in FY 23-24, primarily due to an increase in interest on lease liabilities to 82.51 Million in FY 23-24 from 55.65 Million in FY 22-23. The increase in interest on lease liabilities was mainly on account of new leases for EBOs and the new corporate office.

Other Income

Other income increased by 120.70% to 497.01 Million in FY 23-24 from 225.20 Million in FY 22-23, primarily due to an increase in interest income on account of increased investments from cash generated from business (increased profit and reduced working capital) along with proceeds from the issuance of shares.

Exceptional Items

Impairment loss on goodwill and other intangible assets decreased to Nil in FY 23-24 from 1,546.97 Million in FY 22-23, primarily due to scaling down the business of Just4kids (Momspresso) in FY 22-23. Impairment loss on goodwill and other intangible assets in FY 22-23 was on account of an impairment loss on goodwill of 1,360.63 Million, an impairment loss on software of 19.14 Million; and an impairment loss on trademarks of 167.20 Million.

Tax Expenses

Total Tax expenses increased by 268.75% to 366.02 Million for FY 23-24 from 99.26 Million for FY 22-23, primarily due to an increase in current tax for FY 23-24 and decrease in deferred tax credit on account of termination of deferred tax liabilities in FY 22-23 related to software and brands impaired for Just4kids business.

Profit for the year was at 1,105.28 Million versus a loss of 1,509.66 Million in FY 22-23.

(b) Consolidated Balance Sheet

Equity and Liabilities	As on March 31, 2024	As on March 31, 2023	YoY Growth
	(Rs. Mn)	(Rs. Mn)	(%)
Assets
PPE Including CWIP	204.23	134.25	52.1%
Goodwill	527.75	527.75	0.0%
Other Intangible Assets	1,017.51	1,036.72	(1.9%)
Right-of-Use Assets	1,242.61	825.91	50.5%
Other Financial Assets	2,008.29	790	154.2%
Other Non-Current Assets	36.66	45.14	(18.8%)
Inventories	1,228.36	1,109.77	10.7%
Investments	2,917.69	2,600.38	12.2%
Trade receivables	1,593.76	1,307.79	21.9%
Cash and Bank Balances	4,856.51	680.57	613.6%
Other Current Assets	687.07	707.58	(2.9%)
TOTAL ASSETS	16,320.44	9,765.86	67.1%
Equity	10,952.71	6,059.02	80.8%
Lease Liabilities	1,309.69	885.81	47.9%
Other Non-Current Liabilities	104.04	74.71	39.3%
Other Current Liabilities	1,012.93	779.61	29.9%
Trade Payables	2,941.07	1,966.73	49.5%
Total Liabilities	5,367.73	3,706.86	44.8%
TOTAL EQUITY AND LIABILITIES	16,320.44	9,765.88	67.1%

Assets

Total assets increased by 67.1% to 16,320.44 Million as of March 31, 2024, from 9,765.86 Million as of March 31, 2023.

The increase is primarily attributed to the following:

(i) Increase in Other financial assets, cash and bank balances, and Investments mainly on account of increased investments through profits generated from business and proceeds from the issuance of shares during FY 23-24.

(ii) Increase in Right-of-use assets is on account of leases taken for new EBOs opened and new corporate offices taken during FY 23-24.

(iii) Increase in trade receivables is on account of the expansion of offline business and is in line with an increase in business volumes.

(iv) Increase in Inventories is in line with an increase in business volumes and the addition of new brands during FY 23-24.

Equity

Equity increased on account of issuance of shares for Initial Public Offering (IPO), and ESOP allotment.

Increase in retained earnings on account of profit generated during the FY 23-24.

Liabilities

Total liabilities increased by 44.8% to 5,367.73 Million as of March 31, 2024, from 3,706.86 Million as of March 31, 2023.

The major contributors to this increase are:

(i) Increase in other current liabilities on account of increased TDS liability for ESOP exercised towards the end of the financial year.

(ii) Increase in trade payables in line with increase in business volumes.

(iii) Increase in lease liabilities is on account of leases taken for new EBOs opened and new corporate offices taken during FY 23-24.

(iv) Decrease in other financial liabilities is on account of

(c ) Working Capital Days of Sale

The Company continues to have negative working capital, improving its working capital efficiencies by 11 days as it continued to efficiently improve key levers. This is primarily attributable to improvement in trade payables by 8 days, trade receivables by 2 days and inventory by 4 days.

Particulars	As of 31 March, 2024	As of 31 March, 2023
	(Rs. Mn)	(Rs. Mn)
Current Assets
Receivables (A)	1,593.76	1,307.79
Inventory (B)	1,228.36	1,109.77
Other Current Assets (C)	294.13	371.77
Total Current Assets	3,116.26	2,789.33
Current Liabilities
Payables (D)	2,941.07	1,966.73
Provisions (E)	61.84	40.34
Income Tax Payable (F)	51.01	39.38
Current Lease Liabilities (H)	185.19	146.43
Other Financial Liabilities (I)	226.51	373.33
Other Current Liabilities (J)*	352.11	290.47
Total Current Liabilities	3,817.73	2,856.69
Net Working Capital (K = A + B + C - D - E - F - G - H - I - J)	(701.47)	(67.36)
Revenue from Operations (L)	19,199.04	14,927.48
Number of Days in Period/Year (M) (Days)	366	365
Working Capital Days (N=K/(L/M)) (Days)	(13)	(2)

* Excluding 321.46 Million of TDS payable on ESOP allotment during March 2024.

(d) Cash Flows

Particulars	Year Ended 31 March, 2024	Year Ended 31 March, 2023
	(Rs. Mn)	(Rs. Mn)
Cash Flow from Operating Activities
Profit/(Loss) Before Tax	1,471.30	(1,410.40)
Depreciation of Property, Plant and Equipment (‘PPE)	55.62	25.72
Depreciation of Right-of-Use-Assets	231.02	152.38
Interest Income	(254.32)	(110.02)
Finance Costs	90.41	66.63
Other Non-Cash Adjustments	58.85	1,932.90
Movement in Working Capital	1,024.90	(1,048.10)
Cash Flow Generated from/(Used in) Operating Activities	2,677.78	(390.89)
Income Tax Paid	(324.40)	(124.65)
Net Cash Flow Generated from/(Used in) Operating Activities [A]	2,353.38	(515.54)
Cash Flow from Investing Activities
Capex	(117.68)	(117.19)
Sale/(Purchase) of Investments & Bank Deposits	(4,481.66)	929.17
Others	(98.88)	(383.35)
Net Cash Flow Generated (Used in)/from Investing Activities [B]	(4,698.22)	428.63
Cash Flow from Financing Activities
Proceeds from Issuance of Equity Shares (net)	3,633.25	49.01
Repayment & Interest on Lease Liabilities	(256.76)	(153.88)
Others	(7.9)	(65.64)
Net Cash Flows (Used in)/Generated from Financing Activities [C]	3,368.59	(170.51)
Net Increase/(Decrease) in Cash and Cash Equivalents [A+B+C]	1,023.75	(257.42)
Cash and Cash Equivalents at the Beginning of the Period	46.46	303.88
Cash and Cash Equivalents at the End of the Period	1,070.24	46.46

Net Cash Flows from/(Used in) Operating Activities

Net cash flow generated from operating activities was 2,353.38 Million in FY 23-24 as compared to net cash flow used of 515.54 Million in FY 22-23, primarily as a result of profit before tax of 1,471.30 Million for FY 23-24 as compared to loss before tax of 1,410.40 Million for FY 22-23, Depreciation, and other non-cash adjustments of 181.58 Million in FY 23-24 vs 520.64 million in FY 22-23 and impairment loss on goodwill and other intangible assets of 1,546.97 Million In FY 22-23. There is a further cash generation through working capital of 1,024.90 Million in FY 23-24 vs further cash used in working capital of 390.89 Million in FY 22-23, partially offset by income tax paid of 324.40 Million in FY 23-24 vs 124.65 million in FY 22-23.

Net Cash Flows from/(Used in) Investing Activities

Net cash used in investing activities was 4,698.22 Million in FY 23-24 vs net cash flow generated from investing activities was 428.63 Million in FY 22-23, primarily due to net Purchase of Investments & Bank deposits of 4,481.66 Million and settlement of NCI liability of 230.08 Million in FY 23-24. There was a net sale/withdrawal of Investments & Bank deposits of 929.17 Million partially offset by the acquisition of subsidiaries and a further acquisition of NCI aggregating 459.70 Million in FY 22-23.

Net Cash Flows from/(Used in) Financing Activities

Net cash generated from financing activities was 3,368.59 Million in FY 23-24 vs Net cash used in financing activities was 170.50 Million in FY 22-23, primarily consisting of proceeds from the issuance of equity shares (net of share issue expenses) of 3,633.25 Million in FY 23-24 vs 49.01 Million in FY 23. This was partially offset by principal and interest repayment of lease liabilities of 256.76 Million in FY 23-24 vs 153.88 Million in FY 22-23.

Consequently, the closing cash and cash equivalents as of March 31, 2024, is 1,070.21 Million vis-a-vis 46.46 Million as of March 31, 2023, showing a net increase of 1,023.75 Million.

(e) Key Financial Ratios

Particulars	FY 24	FY 23
Revenue from Operations ( Million)	19,199.04	14,927.48
Revenue Growth (%)	28.6%	58.2%
Gross Profit ( Million)	13,391.76	10,460.15
Gross Profit Margin (%)	69.7%	70.1%
EBITDA ( Million)	1,370.87	227.64
EBITDA Margin (%)	7.1%	1.5%
Net Profit ( Million)	1,105.28	(1,509.66)
Net Profit margin (%)	5.8%	(10.1%)
Basic EPS (After Exceptional Items) ( )	3.57	(4.66)
Return on Capital Employed (%)	14.3%	(22.2%)
Working Capital Days of Sale	(13)	(2)
Invested Capital in Business	(230.02)	551.92
Inventory Turnover Ratio	16.42	16.92
Trade Receivable Turnover Ratio	13.23	15.47
Trade payables Turnover Ratio	2.42	2.74
Current Ratio	2.73	2.21
Debt- Equity Ratio	NA	NA
Interest Coverage Ratio	NA	NA
FCFF ( Million)	2,235.39	632.73

Return on Net Worth (RONW)

Return on Net Worth is a measure of profitability of a company expressed in percentage. It is calculated by dividing the net profit after tax attributable to equity holders of the Group by the net worth of equity shareholders of the Group.

Return on Capital Employed

Return on Capital Employed indicates the ability of a companys management to generate returns for both the debt holders and the equity holders. It measures a companys profitability and the efficiency with which its capital is used. It is calculated by dividing profit before Other Income, interest, and tax by capital employed. Capital employed is the total equity attributable to equity holders of the parent + long term debt.

Basic EPS

Earnings Per Share (EPS) is the portion of a companys profit allocated to each share. It serves as an indicator of a companys profitability. Basic EPS amounts are calculated by dividing the profit/(loss) for the year attributable to equity holders of the Company by the weighted average number of Equity shares outstanding during the period/years.

Gross Profit Margin

Gross Profit refers to revenue from operations less purchase of traded goods less increase in inventories of traded goods. Gross Profit Margin refers to the percentage margin derived by dividing Gross Profit by revenue from operations.

EBITDA and EBITDA Margin

EBITDA is calculated as restated profit /(loss) for the period/year plus tax expense, finance cost, depreciation, amortisation expenses, and exceptional items (impairment loss on goodwill and other intangible assets) less other income. EBITDA Margin is the percentage of EBITDA divided by revenue from operations.

Net Profit Margin

The Net Profit Margin is equal to how much net profit is generated as a percentage of revenue. It is calculated by dividing net profit by turnover.

Working Capital Days of Sale

Working Capital Days of Sale is calculated as Net Working Capital divided by revenue calculated daily.

Inventory Days of Sale

Inventory Days of Sale are calculated as closing inventory divided by revenue calculated daily.

Trade Receivables Days of Sale

Trade receivables Days of Sale are calculated as closing trade receivables divided by revenue calculated daily.

Trade Payables Days of Sale

Trade payables Days of Sale are calculated as closing trade payables divided by revenue calculated daily.

Free Cash Flow to the Firm (FCFF)

FCFF is a measurement of a companys profitability after all expenses and reinvestments. FCFF is calculated by deducting the capital expenditure from net cash flow generated/ (used in) from operating activities.

Supply Chain and Logistics

The integrated supply chain, extending across six cities in India, is a cornerstone of the Companys operational efficiency. Comprising 11 warehouses managed both internally and through third-party partners, the distribution network ensures timely delivery to consumers, modern trade accounts, distributors, and super-stockists. Leveraging data and technology, the supply chain operates with precision and agility. Pin-code-level data informs strategic decisions on warehouse placement and capacity planning, while the Enterprise Resource Planning and Order Management System streamlines operations from procurement to distribution.

End-to-end inventory visibility, facilitated by the data analytics team, enables algorithm-driven inventory allocation, optimising efficiency across the network. Moreover, machine learning tools drive demand forecasting and replenishment, empowering the Company to respond nimbly to market and channel dynamics. This tech-driven approach extends to a digital-first strategy, where distinct product catalogues cater to online and offline channels, ensuring a seamless customer experience.

Technology

Technology serves as the cornerstone of Honasas business strategy, enabling seamless integration across all brands, channels, and supply chain operations. The comprehensive technology stack encompasses five key components, each geared towards enhancing efficiency and driving growth. The shopping stack supports direct-to-consumer channels, encompassing consumer-facing applications, backend functionalities, and third-party integrations to optimise demand forecasting, inventory management, and logistics. With a dedicated in-house tech team, the Company continuously enhances its platform capabilities, ensuring scalability and adaptability.

The robust data warehouse and consumer 360 views empower Honasa with real-time insights, enabling personalised consumer experiences, enhanced customer share of wallet, and optimised channel strategies.

Through an organisational product suite, including proprietary tools like User Conversational Research and Online Competitive Intelligence, the Company innovates products faster, optimizes marketing strategies, and captures emerging trends.

Business efficiency drivers, such as ERP, OMS, and Demand Planning, streamline operations, facilitating data-driven decisions and agile responses to market dynamics. Moreover, the focus on information security and data privacy underscores Honasas commitment to safeguarding customer data and preventing breaches.

People and Culture

As of FY 23-24, the Company employed 842 permanent full-time staff on a standalone basis across a variety of business functions. In addition, the Company also engaged the services of contractors and consultants during this fiscal year to support its operations.

The workforce at Honasa is characterised by diversity, with women comprising over 53%* of the employees.

Number of On-roll Employees for the Standalone Entity by Departments as on March 31, 2024

Department	Number of Employees
Management	6
Revenue	442
Marketing	91
Finance	48
Innovation	56
Supply Chain and Operations	53
Human Resources	24
Brand Factory	25
Tech, Product and Data	72
Corporate Communication	3
Legal and Regulatory	6
Strategy	16
Total	842

ESG

Environmental, Social, and Governance (ESG) principles are deeply ingrained in the organisational ethos, driving Honasas commitment to sustainability, societal welfare, and ethical governance. The Companys purpose-driven approach extends across all brands, products, processes, and operations, reflecting ongoing dedication to these three pillars.

In terms of environmental sustainability, initiatives like Plant Goodness demonstrate Honasas commitment to reducing carbon footprints and enhancing environmental quality through tree planting. Geo-tagging each tree ensures transparency and accountability. Furthermore, as a plastic-positive organisation, the Company has actively contributed to plastic recycling, surpassing the amount of plastic used in all products.

On the social front, initiatives like Redefining Beauty under the Mamaearth brand and initiatives undertaken through The Derma Co., Aqualogica, and BBlunt reflect the dedication to giving back to society. From recognising acts of goodness to providing education, clean drinking water, and upskilling opportunities, the Company strives to make a positive impact on communities.

Mamaearth

PLANT GOODNESS

• 6,00,000+ Trees Planted: Supporting environmental sustainability through extensive tree planting initiatives

• 3,800 Acres of Land Greened: Contributing to the restoration and preservation of natural habitats

• 12,000+ Tonnes of Fruit Production: Promoting agricultural productivity and rural livelihoods

• 500k Tonnes of Oxygen to be Generated:

Contributing to cleaner air and a healthier environment

The Derma Co.

YOUNG SCIENTISTS

• 20,000+ Students Engaged: Inspiring and educating future generations in Bengaluru and Chennai

• 76 Schools in Bengaluru and Chennai: Partnering with educational institutions to enhance learning experiences

• 42%+ Knowledge Improved: Empowering students with valuable scientific knowledge and skills

Aqualogica

FRESH WATER FOR ALL

• 500+ Households have Access to Potable Water: Ensuring clean and safe drinking water for communities

• 400+ Hours Saved Daily: Enhancing productivity and quality of life

• 100% Women-Focused Interventions: Supporting gender equality and womens empowerment

BBLUNT

SHINE ACADEMY

• 10,000+ Women Certified: Empowering women with skills and certifications in hair care and styling

• 11 States: Promoting education and professional development across diverse regions

Ethical governance is at the core of the Companys operations, upheld by a distinguished board and supported by independent directors who ensure adherence to high corporate governance standards. Multiple committees, including those for audit, risk management, and corporate social responsibility, bolster oversight and governance across key functions, fostering trust and transparency. Additionally, Honasa works with one of the Big 4 for statutory audits and a top-tier internal auditor to strengthen the corporate governance framework. The workplace diversity, with more than half of the workforce comprising females supported by strong systems and processes, further buttresses the framework.

Information Security and Data Privacy

Honasas information security and data privacy framework contain guidelines for protection against security threats to technology and information systems, specifies procedures to protect customer data, and contains guidelines on the usage of customer data. Under the policy guidelines, the Company does not transmit any customer data to external third parties, including third-party databases. To prevent any data breaches, the Company has implemented various measures such as firewall protection, virtual private network access (VPN), and 2-factor authentication systems to restrict unauthorised access to the systems and servers. Regular malware scanning is conducted to detect and prevent data breaches. During the year, the Company engaged one of the Big 4s and is now ISO 27001 compliant and ready.

Risk Management

The Board has established a Risk Management Committee (RMC) to develop, implement, and oversee the Companys risk management framework. The RMC plays a critical role in monitoring and reviewing these procedures to ensure their ongoing effectiveness. In addition, the Audit Committee provides supplementary oversight, focusing specifically on financial risks and controls. Strategic risks that impact the Company are identified through a robust Enterprise Risk Management exercise. This process involves identifying risk owners and implementing mitigation measures. Progress on these strategic risks is closely monitored and reported to the RMC periodically. The Governance, Risk and Compliance team drives the Companys risk management initiatives. They conduct regular assessments to identify, prioritise, and mitigate operational, financial, strategic, and regulatory risks. These efforts are coordinated across the Company to ensure comprehensive risk management. Furthermore, a detailed risk register is maintained and updated regularly to track identified risks and ensure they are effectively mitigated. This structured approach underscores the Companys commitment to proactive risk management and transparency, reflecting its efforts to safeguard the Companys interests and enhance long-term sustainability.

Key Enterprise Risks Operational Risks

1. Brand Reputation: refer to potential threats or hazards that can adversely affect a companys image or standing in the eyes of its stakeholders, including customers, investors, and the public.

2. Offline Scale Risks: refer to challenges in expanding physical retail operations in a way that supports long-term growth and profitability. This risk can lead to operational inefficiencies, inconsistent customer experiences across locations, and difficulty in adapting to changing market conditions.

3. Supplier Concentration Risks: refer to the potential vulnerability a business faces when it relies heavily on a small number of suppliers for its goods or services. This risk arises because disruptions such as supplier bankruptcies, production issues, or geopolitical factors can significantly impact the availability, cost, or quality of essential inputs.

4. Revenue Vulnerability from SKU Concentration: refer to the vulnerability of a business when a significant portion of its sales revenue is derived from a limited number of Stock Keeping Units (SKUs). Dependency on a few SKUs can expose the business to fluctuations in demand, inventory management challenges, and increased risk of revenue loss if consumer preferences shift or if there are disruptions in the supply chain related to those specific products.

5. Leadership Attrition and Talent Retention: refer to the potential negative impact on an organisation when key leaders and talented employees leave the Company. Leadership attrition can disrupt strategic direction, weaken organisational stability, and lead to a loss of institutional knowledge.

6. Supply Chain Disruptions: refer to unexpected events that interrupt the normal flow of goods and materials within a supply chain. These disruptions can be caused by various factors, including natural disasters, geopolitical events, transportation issues, supplier failures, and pandemics.

7. Natural Calamities and Epidemics: refer to the potential adverse impact on business operations caused by natural disasters (such as earthquakes, floods, and hurricanes) and widespread health crises (such as epidemics or pandemics).

Strategic Risks

1. Unsuccessful New Product and Brand Launches: refer to the potential negative impact on a company when new products or brands fail to meet market expectations or achieve projected sales targets.

2. Success of Exclusive Brand Outlets: refer to the potential challenges and uncertainties associated with the performance and profitability of a companys exclusive brand outlets (EBOs).

Sectoral Risks

1. Dependence on Third-party E-commerce Platforms: the risk of dependence on third-party e-commerce platforms refers to a situation where a company relies heavily on external online marketplaces to sell its products.

2. Competition Risk: refer to the potential challenges and threats that arise from competitors within the same industry or market.

Financial Risks

1. Inflation Risk: refer to the possibility that rising inflation rates will negatively impact the purchasing power of money, leading to increased costs for businesses.

IT Risks

1. Failure of Critical IT infrastructure, Applications, and Systems: refer to the potential disruptions or breakdowns in essential technological components that are crucial for business operations.

2. Security Breaches and Cyberattacks: refer to deliberate attempts by unauthorised individuals or entities to gain access to sensitive information, disrupt operations, or cause damage to computer systems, networks, or digital assets of an organisation.

ESG Risks

1. Ethics, Compliance, Legal and Regulations: refer to the potential challenges and consequences arising from ethical breaches, non-compliance with laws and regulations, or failure to adhere to industry standards.

Risk Mitigation and Future Direction

In response to significant growth and expanded business operations, the Company is currently improving its existing Risk Management framework to better fit with its strategic objectives.

The Risk Management Policy is being refreshed to update the roles and responsibilities of each stakeholder, criteria of risk prioritisation along with assessment of existing and any new risks that the Company might have been exposed to. The Company will continue to periodically report key risks to the Board or RMC to ensure effective risk management and mitigation.