The ‘Rs 300 crore unsold inventory charge’ that Mamaearth has ‘trashed’ – Times of India

Honasa Consumer, the parent company of popular beauty and personal care brand Mamaearth, has refuted claims by the All India Consumer Products Distributors Federation (AICPDF) regarding excessive unsold inventory. The federation had alleged that near-expiry stock had burdened distributors with a significant financial loss of Rs 300 crore.
In a regulatory filing, Honasa Consumer dismissed these allegations as inaccurate. The company stated that the total inventory value in the distribution chain was significantly lower, amounting to Rs 40.69 crore. Moreover, the pending market scheme settlements were valued at Rs 4.73 crore, far below the AICPDF’s estimate of Rs 50 crore.
Honasa Consumer is currently undergoing a major restructuring of its general trade strategy, transitioning from a super stockist model to a direct distributor model. This transition, while aimed at improving efficiency, has had a negative impact on the company’s recent financial performance. In the September quarter, the company reported a net loss of Rs 19 crore and a 7% decline in operating revenue.
The company has acknowledged that the restructuring process has been more challenging than anticipated. However, it remains committed to executing the strategy and mitigating the associated costs. Honasa Consumer has also disclosed that the total returns, including provisions for future returns, amount to Rs 63.52 crore. Of this, a significant portion has already been received, with the remaining amount expected to be recovered from distributors.
In an interview to Economic Times, Honasa Consumer CEO Varun Alagh said, “The impact (of the restructuring) was higher than what we had planned and expected. We initially had certain assumptions in place, which were based on a certain level of inventory, but as we reached the execution stage, it turned out to be relatively higher.”
The controversy surrounding inventory levels and the ongoing restructuring have led to a significant decline in Honasa Consumer’s stock price, resulting in a loss of over $400 million in market capitalization.