Honasa issues clarification on distributors' body reports and social media conversations
Earlier this week, the AICDF was concerned over the "unethical stock dumping practices" of Honasa
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Honasa Consumer Ltd, the parent firm of brands like Mamaearth, Aqualogica, and The Derma Co, has refuted the claims of All India Consumer Products Distributors (AICPDF) on the inventory issues of the company. In a stock exchange filing, Honasa called AICPDF's claims on distribution transition "misinformation".
"As of 31st Oct 2024, as per data from the Distribution Management System implemented at Honasa distributors currently active and associated with the company, the distribution value-chain, consisting of direct distributors, super stockists, and sub-distributors, carried a total inventory of Rs 40.69 crore, (as against the quoted figure of Rs 300 crore of near-expiry inventory by AICPDF)," the skincare brand said.
On Project Neev, the company clarified that it has removed the 2-layered channel partner structure of super-stockists and sub-distributors from Top-50 cities, and is setting up a single-layered distributor structure.
"We have implemented this single-layered structure across 70 percent of these cities, through the appointment of new direct distributors," Honsasa's official statement mentioned.
It added that the total returns, including provisions for subsequent returns, totalled Rs 63.52 crore. Of these, the company has already received returns worth Rs 41.21 crore in its warehouses, while balance returns of Rs 21.32 crore are in the process of being picked up from the concerned distributors.
Further, the company said that claims from General Trade channel partners pertaining to market schemes, pending with the company for settlement, is only Rs 4.73 crore as of 30th Sep 2024 (as against the quoted figure of Rs 50 crore of unsettled credit notes by AICPDF).
Accounts receivables from General Trade distributors have also reduced from Rs 46 crore as on March 31, 2024, to Rs 25 crore as of September 30, 2024. The amount collected from distributors over the past six quarters has been consistently healthy, and stands at 94 percent of sales (inclusive of GST), it added.
Earlier this week, the AICDF was concerned over the "unethical stock dumping practices" of Honasa. The group claims that distributors and retailers are facing an “alarming crisis" of unsold inventory nearing expiry, resulting in a financial burden of approximately Rs 300 crore.
In FY 24, Honasa brought a change in its distribution approach, dubbed Project Neev, in which it reduced its dependency on super stockists (large distributors) to ramp up offline distribution.
According to Co-founder Varun Alagh, offline is a "hero product business" of the company. "Getting them in the right sizes, distributing them in the places, and focusing very strongly on that is something that we will need to dial up".
Honasa reported a Rs 19 crore loss in the second quarter of FY 25- the first since its IPO in in November 2023.
The skincare brand announced a consolidated loss of Rs 18.57 crore for the second quarter ending September 30, 2024, due to inventory adjustments. In the corresponding quarter of the previous year, the company reported a profit after tax of Rs 29.43 crore.
