Distributors' Body Voices Alarm Over Unsold Honasa Stock Worth Rs 300 Crore

The All India Consumer Products Distributors Federation has raised concerns over the "unethical stock dumping practices" of Mamaearth parent, Honasa Consumer Ltd. The distributor group claims that distributors and retailers are facing an “alarming crisis" of unsold inventory nearing expiry, resulting in an estimated financial burden to the tune of Rs 300 crore.

"Adding to the crisis, credit notes worth more than approximately Rs 50 crore remain unsettled, creating severe cash flow challenges and threatening the stability of the entire distribution network," the body said in a statement.

Honasa, however, has denied the allegations, noting that the figures mentioned by the FMCG distributors body are “inconsistent" with the sales driven through the channel.

"We have actively and transparently addressed our transition (under Project Neev) to a direct distribution model during our results for Q2 FY25. Significant progress has been made to remove stocks worth Rs 63 crore from our distribution system as part of the transition away from super stockists. All secondary claims from active distributors have been cleared up till August, and the rest are in final stages," the company said in a statement.

Citing Nielsen data, Honasa said that the company's stock turnover ratio has improved from 35 to 27 days in the past year while the category still stands at 35 days in general trade.

"This directly disproves the claim of high expiry of stock in retail," it said.

Shares of Honasa Consumer plunged 20% on Monday to drop below its listing price as analysts cut price targets after the company reported a weaker-than-expected financial performance in the September quarter, hurt by slow growth in its flagship brand Mamaearth.

The company reported a 7% drop in consolidated revenue to Rs 462 crore and a Rs 19 crore loss—the first since its initial public offering last November. In the last five days, the stock has plunged 31.46%.