Honasa Consumer Ltd (NSE: HONASA) Q3 2026 Earnings Call dated Feb. 12, 2026
Corporate Participants:
Varun Alagh — Chairman of the Board, Chief Executive Officer, Whole Time Director
Ramanpreet Sohi — Chief Financial Officer
Analysts:
Rajat Gupta — Analyst
Abneesh Roy — Analyst
Vivek Maheshwari — Analyst
Percy Panthaki — Analyst
Videesha Sheth — Analyst
Nihal Mahesh Jham — Analyst
Prateek Poddar — Analyst
Sukrit Patil — Analyst
Akshay Krishnan — Analyst
Jay Prakash Maheswari — Analyst
Presentation:
operator
Sam sa. Sa. Foreign. Ladies and gentlemen, good day and welcome to Honasa Consumer Q3FY26 earnings conference call hosted by JM Financial Institutional securities Ltd. 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 the conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajat Gupta from JM Financial. Thank you. And over to you.
Rajat Gupta — Analyst
Good evening everybody. Welcome to the 3Q FY26 earning conference call of Honasa Consumer Limited. Today on call we have Mr. Varun Alag, Co Founder Chairman as Chief Executive Officer, Ms. Garthel Alag, Co Founder and Chief Innovation Officer and Mr. Ramanpreet Sohi, Chief Financial Officer. I now hand over the call to Mr. Varun for his opening remarks. Over to you sir.
Varun Alagh — Chairman of the Board, Chief Executive Officer, Whole Time Director
Hi. Thank you so much and thanks everyone for joining. Welcome to the Q3FY26 update for Hanasa Consumer Private Limited. As is customary, we’ll start by sharing a key trend that we have been witnessing in the beauty and personal care industry which is a trend in men’s skincare and we believe men’s skin care is at an infection driven by women consumer preferences. Men’s grooming has been talked about for quite a long time but we saw at least in the last decade largely action on the shaving or beard care side. Last two years we’ve specifically been noticing a strong inclination towards skincare which is specifically designed for men.
We’ve seen these specifically in the search data that we track. Like in a sunscreen category. Consumers are specifically searching for sunscreen for men in a face cleanser category. They’re searching for face wash for men. In this form men call out has been increasing multifold over the last two to three years. We’ve also seen significant increase in male skin care influencers almost six times in the last five years. All of this is happening because of rapid premiumization, awareness and evolving self care mindset. And this is making us feel that this is an interesting space which will get shaped and will grow really well in a.
And this is also space where Onasa has made an acquisition that we will talk about during the course of the presentation which is Reginard. But over to this quarter’s financial snapshot, I’m delighted to share that we have delivered our highest ever quarterly revenue. The company has grown by 21.7% in terms of revenue growth. This is Also led by volume. Our UBG is at 30% growth. It’s our highest ever EBITDA which has also sequentially grown. We’ve almost doubled our PAT which is again our highest ever pat and we continue to be negative on our working capital cycle.
So the core engines that we have been talking about for the last three quarters the flywheel around making our core stronger which is Mama Earth that’s back into teens via my growth and continuing strength of our young brands which are now growing at 25% plus in terms of growth has led to us delivering this competitive market leading growth for us and also in line with the scale as well as the effectiveness coming in our marketing. We have consistently seen improving EBITDA margin trajectory for the company which we have been talking about and have been able to deliver.
If we sort of again call out. We had mentioned this in the last quarterly meeting as well that there is a a revenue recognition impact which has happened on account of Flipkart Group changing. There’s revenue recognition and because of which there is a 28 crore impact that we are seeing. But if you also correct a basis then the growth continues to be at a 21% level and like to like it’s 21.7. If we were to see hen supported numbers and we have delivered 602 crores in terms of reported revenue EBITDA is at 10.9% the same 66 crores.
This revenue recognition impact has not led to any impact on bottom lines. It’s just a recognition impact that we see in our revenues double clicking on the business. I think from a channel perspective what is heartening to see now is that all the channels are actually doing quite well. E Commerce is at a 20% plus growth. Modern trade and GTE now is also delivering 25% plus growth. These are offtake growths and secondary growths which is a great sign of the brand traction. Our strategy of focusing on our focus categories has also clearly paid off. Our focus categories continue to grow ahead of the company overall group numbers at 25% plus and these are the categories which are getting 90% plus of our investments and we continue to focus on strengthening our share in these categories.
Mama which is back to teams growth. It’s taken some time but focus on fundamentals has really helped us deliver. This started with superior market beating formulations. We have consistently been talking about how we’ve been increasing and improving our formulations to deliver blind test winning formulations across our products. We’ve also worked a lot on our communications to make Them more aspirational to the new Gen Z consumer and we have focused our investments in the six focus categories that we have identified for mama. Combination of this is that we are now back to double digit growth and we are winning in our value share as well as share amongst handlers.
Share amongst handlers actually has moved ahead of our value share which means that now we have more catch up job to do on our distribution front. And if you do that that will give further growth in offline ecosystem as well. And as we do that we are also building other categories like moisturizers in offline. Our young brands of course continue to sustain their momentum. We plant will focus on hair color Aqualogica with moisturizers and mist being new categories. Dr. Sheth with premium serums which we are shaping stays which has now cost 50 crores arrived and continues to grow well.
And of course the star in this portfolio continues to be Dermaco which is continuing to not only deliver strong growth but has also achieved a double digit EBITDA profile. Now in the spot of drive innovation across categories we have entered hair care with peptides and triple actives. Our sunscreen formulations have become even better with new generation filter filters like Tinosorb and Metroxyl. And consumer interest of course continues to be strong in our core categories which is demonstrated with searches and the share gain that we are seeing on the brand. So continued successful momentum on the another area of focus in the last four quarters of course has been offline execution where clearly our shift to direct distribution has started to pay off strongly.
Our outlet reach has expanded, our direct distribution contribution has expanded to almost 80% revenue contribution. Now our weighted distributions are healthy and our inventory holding days are now optimized at about 30 days which is fairly healthy for complex inventory system like ours in modern trade. Also we continue to build reach in an outlet presence. This is an account of the offtake that the brand sees and the share gain that the brands are seeing. So all in all offline is in healthy shape and ready to service the brands and growth trajectory in future as well we continue to invest in product renovation and innovation.
Again we have got multiple new formulations which have delivered blind test winning performance with international leading brands and their core partitions. We are very happy to see the performance that these products continue to deliver and what our R and D team continues to this is a continuous process, not a one time activity. It’s a muscle that we have built and we keep deploying these muscles to make our products even better for our consumers. As we Move forward. I think from a future perspective what we talked about, we keep looking at white spaces in the landscape and keep building hypothesis around those white spaces and sometimes we come across brands which completely fit into those hypothesis.
I think Reginald Men has been one of those brands which completely fit into our male skincare boom hypothesis and the brand has done extremely well in the last two years of its existence and become the most searched men’s sunscreen brand based on a multi benefit proposition which is Men like they don’t want to get into multi regime but you know, products which can do multiple things in one and also helps us enhance our presence in South India since we’ve not only acquired a brand but acquired a talent and a team which sits out of Hyderabad and continues to run this brand which will help us strengthen our understanding of the region as well as find ways to strengthen our brands in that region.
Us being a North Indian company get that slight disadvantage in terms of the talent that we’re able to get here. But now having presence in Hyderabad we’ll actually be able to hire and attract more talent which can help us strengthen our presence in South India. And it also of course is additive to onasa’s portfolio where we did not have any brand that was focusing on men’s skincare. So all in all pretty excited about this acquisition and I think overall we’ve been focusing on refreshing our playbook or flywheels so to say. And we’re feeling quite confident that now the principles that we have come up with which start by focusing on identifying the right partition, building a product which is a blind test winner in that partition, focusing then on investing sufficiently behind that hero product through the right content and media mixes and providing it at distribution supercharged across both e commerce, quick commerce as well as offline landscape followed by again keeping an eye open for future growth engines where we can deploy the same cycle is giving us strong confidence that we’ll be able to sustainably use this cycle to deliver market beating growth and gain share across categories of our interest as we move forward.
Of course we continue to build purposeful brands which not only grow but also contribute to the society. Mama Earth has now planted over a million trees on its birthday this year we ran anti smog guns across NCR to help reduce pollution. Thermal coal continues to educate children through science classes and science labs that we set up. We have touched almost 40,000 students. Lives be blunt continues to certify women in hair care and styling. Over 15,000 Aqualogica is providing fresh water to rural households by deploying plants where they can get access to fresh water. And Dr.
Sheth is running health checkup camps and now almost 45,000 plus individuals touched by this. So all in all, as our brands grow, the contribution to community also grows. And that’s what we would like to sign off with and we are more than happy to answer the questions that you have. Thank you.
Questions and Answers:
operator
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 the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We’ll take our first question from the line of Abneesh Roy from Nuvama. Please go ahead.
Abneesh Roy
Thanks. My first question is in sunscreens we have seen the market leader become a bit more aggressive past few months. How has been the market share and I’m asking about the real market share in your sense, not the official third party market share data because that may not give the true picture many times. What is the sense on how the market share shaping up in some stream?
Varun Alagh
Hi. So honestly there is no other indicator of market share that we get for online. The only place that we get is from Nielsen which is offline and Honestly we believe 60 to 70% of the market lies in online. We did get a Euromonitor indication last year which has declared that Dermaco is now the number one sunscreen brand in the country ahead of the legacy brands. So that’s one external piece of data which is based on external interviews that we have. Otherwise our brands continue to be strong, our brands continue to be bestseller across platforms and are focused on using multiple brands to win in the sunscreen portfolio where we have something in actives, in Dermaco, in Hydration, in Aqua Logica and Naturals with Mamaheart continues to be an area which is delivering well for us.
Abneesh Roy
Thanks. My last question is it was a strong quarter for you and even your core brand of Mama has seen good growth come back. Your distribution expansion also has been quite decent. So my question is how do you see coming quarters? This kind of a good uptrend will continue or there was some kind of a one of any GST kind of a positive impact you saw overall in the quarter.
Varun Alagh
So we are feeling quite confident that our flywheel and our fundamentals have started to clearly deliver in terms of strong outcomes for the company both in terms of top line and bottom line. We are very confident that this trend of delivering strong growth and continuing to improve on our margin profile year on year is something that will continue. And we don’t think it’s a one off G steam pack. It’s actually share gain that we have seen that we also shared. So if it was not share gain driven then one could have said all tides are everyone’s rising because tides are.
But we have seen strong share gains in our core categories which clearly points to the fact that we have done significantly better than other brands, which is why this has happened. And the playbook and investment playbook that we have built around media and content continues to become even better. So I think we’re feeling quite confident on being able to continue this trajectory.
Abneesh Roy
So thanks. That’s all from my side. Thanks.
Varun Alagh
Thank you.
operator
Thank you. Next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Vivek Maheshwari
Hi, good evening. Varun and team. A few questions so fast continuing with the earlier one. So you know, teams growth in case of Mama Earth. Basically you are saying this is something that we can, let’s say we can build for the next, let’s say for the next five quarters until FY27 end.
Varun Alagh
Vivek that’s going to be our plan and we’re feeling confident that we should be able to deliver the same. There is so much opportunity, like I said, in terms of just the gap between share among handlers and market share and hence the potential distribution gain that we can do as well as the brand now strengthening and multiple other categories available where we can gain share. So I think we are feeling confident that we should be able to continue with this momentum and this.
Vivek Maheshwari
Got it. Interesting. And you know, for the last few quarters and more specifically this quarter you have been, you know, highlighting and talking a lot about distribution right now. Historically, you know, there has been a curve that you have followed and again I’m just you know, putting some, let’s say random numbers so to speak. But let’s say if at 500 crores you started going online and you thought that you will go online, do you think that milestone or that threshold comes down because your distribution network is far more robust. So therefore, you know, you don’t necessarily have to wait for 500 crores, you can start early and if so what does that imply for the growth brands?
Varun Alagh
Vivek, to be honest, I don’t think that milestone has changed significantly. What I can qualify is that it’s not a brand size milestone but more of a category into brand milestone So I mean if you are in a category and you become sizable share within that category, even if you’re not 500 crores. But let’s say if you’re in sunscreen and you become 200 crores just in sunscreen online, then also you have right to go into offline. But the offline play for brands in our mind is not just about distribution, it’s also about pull. And only when you reach a certain scale in online that you see that natural pull in offline because of which you are able to then execute better.
I mean now when Jamaico was taken offline, actually our retail margins in Dhammako are lower than what the margins in mamas are because it has gone offline when we have already established mamats and the Dermaco pull was also established. So it allows you to build the brand more effectively as well as it allows you to build more confidence amongst retailers. So in my mind those benchmarks haven’t changed. In fact in future those benchmarks might go up because the online market itself is expanding. And what you can achieve in online, in terms of benchmarks, every three to five years that benchmark itself will keep increasing.
Vivek Maheshwari
Wow, that’s interesting Varun, because I thought, you know, the entire thing about traditional FMCG companies always was that you know, there is a massive pull, let’s say for their hero brands and products which is significant to the overall revenues. And then you know, they will push, all the new brands will ride on the, the pull factor. So there is a pull and then you have a push. I would have imagined with Mama Earth also, you know, having so much pull you, you could have probably accelerated that migration or you know, that duality. But you don’t think that that’s going to be the case because just sheerly because your distribution quality and scale has gone up.
Varun Alagh
Yeah, you can, we can, if we want, we can put it in stores. Right. But that doesn’t really help. Today’s consumer has got multiple sort of choices in every category. 10 to 15 years ago also that phenomena wasn’t as diverse and they largely know what they want to buy. So just because the brand is available in stores doesn’t give the brand a right to win offline. In our view, brands will win. They have created traction and pull and that takes its own journey. And if you’ve not been able to establish it in online, then ideally one shouldn’t extend into offline because you will just create high strs for the brand and in general your retailers and distributors capital will get Stuck in wrong kind of inventory which is not moving which will not allow you to put the right kind of inventory which can move faster.
So we are being very choice and we are taking care of of the fact that there should be high velocity SKUs which should be put into GT and even in Dharmaco it’s only, you know, set of 20 SKUs that we’ve taken into offline which are the highest velocity SKUs. So I think that’s, that’s our philosophy. We’ll continue to execute like that.
Vivek Maheshwari
Got it. And last question which has you know, two parts both from a top line and margin perspective and I’m sure you will say that market has always been competitive but you know Varun, when we talk to the traditional legacy FMCG companies I think there is a renewed focus and impetus to drive growth in online because E commerce and whatever is happening on the landscape. So two parts. One is how do you think about the entire competitive intensity from your growth perspective as well as from a margin standpoint because a lot of companies are happy to spend much more to drive growth.
So can you just you know, talk about both these aspects?
Varun Alagh
I’m happy to address that Vic. I mean honestly this focus change and aggression has been there for now six plus quarters I think where it was clearly recognized and a lot of folks restructured and clearly announced their focus to with this and also have used multiple levers including deep discounting, etc. In these channels to drive sales. And in spite of that we have seen our trajectory is only improving as we also build the organization. I think our DNA, the fact that we are digital first, our understanding of Gen Z content engines and the way the organization is tuned towards that will always provide an edge in terms of us being able to be faster in terms of winning in that environment.
And we are feeling confident that if we could ride the aggression which has been there in the last one year, even if it goes up, I don’t think anything is going to stop our plans of performance. We’ll continue to find ways to ensure that we are ahead of the curve.
Vivek Maheshwari
Super. Thank you. Wishing you and your team all the very best.
Varun Alagh
Thank you.
operator
Thank you. Next question is from the line of Percy from iifl. Please go ahead.
Percy Panthaki
Hi Varun and team. Congrats on a great set of numbers. I just wanted to sort of zoom in into the margin delivery. So the margin has come at the cost of some cut in the ad spend and even other expenditure is on the lower side. Just wanted to understand is there any quarterly phasing issue or whatever reductions that we have seen are sort of structural in nature and likely to continue.
Varun Alagh
Hi Varsi. So I think I’ve always called out that there are three key buckets from which the company will see EBITDA expansion happening both in short and in long term. Those buckets are NP leverage, those buckets are payroll leverage and other OPEX leverage. And the combination and contribution from these three might vary in different years, but these are the three key buckets that we know our leverage will come from even this quarter. If you look at just the ANP part, actually value, ANP sequentially has gone up and hence it’s not a reduction. We continue to be strong, continue to be fully funding our brand and marketing plans, but we’ve become more effective.
The same plans focused on certain core categories consistently and focused on sharper media and messaging are now delivering much better outcomes because of which the percentage is going down. Of course there are quarter to quarter phasing pieces also which continue to sort of exist, but I wouldn’t honestly worry them because if there is phasing in the other buckets, you can see that sort of benefit that can come in. But all in all I think that trajectory of ANP in value actually increasing everywhere but still giving us leverage benefits in percentage is something that we are confident will keep happening as well as the combination of Payroll and other OPECs, sometimes because of others and sometimes because of payroll, will continue to give us that benefit.
And year on year is how we see that.
Percy Panthaki
Margin going forward. Like in FY27 on a full year basis, should we like look at 100 basis points yoy expansion every year for next 2, 3 years? Is that like a fair expectation for us to have?
Varun Alagh
Yes, Parsi, that’s a fair expectation. That’s the plan that we have talked about in the past as well, that every year our goal will be to improve the margin profile by 100 basis points.
Percy Panthaki
Got it. Second question is on the newer brand, so we know that Dermaco is doing very well. Can you give some information on Aqualogica? Is that doing equally well? Are the growth rates similar, lower, higher, etc. And also related question is that now that we have the ME portfolio back on track on growth, what could be the next Dermaco or Aqualogica? Like we have now three brands which probably constitute 90, 95% of our sales. And while there is still scope for growth in Dermaco and Aqualogica, we obviously have to build ahead of time. So what can be the fourth pillar apart from these three Brands where you can see some initial signs of success or which you think can sort of become big or drive growth over the next two, three years where you have confidence.
Varun Alagh
Parsi, on the first part of the question, I think we always talk about our young brands together. So the young brands have delivered 25% plus growth and we continue to be very bullish on the future of our younger brands. From a perspective of what could be the next rising star. Honestly, it’s a race to be the next rising star. Regional can itself be a 500 crore brand in the next four to five years that we have acquired. Dr. Sheth has very strong sort of right to win like the tailwinds and actors as well. Be blunt in professional hair care can become a sizable opportunity stays it is a young brand but is playing in the color cosmetics business which itself is a very large category and could also be a shining star.
So I think in our view there is a race to become whole Britain x 500 crores and we would like to see that happen.
operator
Sorry, you’re sounding muffled. Yeah.
Percy Panthaki
Better now. Is it better? Yeah. So Varun, while I can understand you don’t want to give the numbers separately for Aqua Logica, Dermaco etc and I’m not asking for that, just want some kind of reassurance that Dharma Aqualogica is also performing sort of well and is in line with whatever targets that you had put in or is it sort of falling short of them?
Varun Alagh
It’s on plan.
Percy Panthaki
Okay. Okay, got it. That’s all from me. Thanks and all the best.
operator
Thank you. Next question is from the line of Vidisha Sheth from Ambit Capital. Please go ahead.
Videesha Sheth
A couple of questions have been answered. Just one more. In case of Mama Earth. We’ve spoken on product superiority and sharpened investments driving back growth from mid teens. But to understand the impact from these interventions, is it also possible to share any further color on as to how has the cohort retention or repeat rates or say productivity at distributor level changed for whichever channel available?
Varun Alagh
I think when you see this kind of growth which is happening across channels and it’s not just happening in primaries but in offtakes in modern trade in asymmetric and captured share in secondaries in general trade across E commerce, it just points to the overall consumer franchise becoming stronger for the brand. I don’t think we are at this size and scale. We are looking at numbers like cohort, et cetera because that becomes too small at young PMF level. It makes sense to sort of do that overall brand love, affinity, consumer Feedback, data, nps, everything is moving in the positive direction.
Ad spawn Tom on the brand is also moving in the positive direction. So all of that is put together making us feel confident that the actions that we have taken and which we continue to apply on the brand are in the right direction.
Videesha Sheth
And the second bit was in continuation to the earlier participants question on the other brands. So do you think that there are further interventions in terms of either innovation or brand repositioning which are required for upcoming brands like Dr. Sheikha Vbrand.
Varun Alagh
So honestly, you know, every three to four years we look at our brands, right and we relook at the positioning from the future TG perspective. We’ve done that on Mama twice now in terms of packaging and communication launch and we have done that on Dermaco once already in its life of six years. And similarly Aqualogica actually we’ve already done a lot of work to make it more appealing to Gen Z and Gen Alpha. And there is a new refresh which is coming up in the summer season. Similarly, Dr. Sheth will also see that journey. I mean honestly, that’s a continuous exercise that we will do on our brands to make them more relevant and exciting to the new generation.
So I think you would see continuous action across branches.
Videesha Sheth
Sure, got it. Thanks. That’s all for now.
operator
Thank you. Before we take the next question, would like to remind participants to ask a question. Please press star n1 on your phone. Next question is from the line of Nihal Mahesh Shyam from hsbc. Please go ahead.
Nihal Mahesh Jham
Yes, hi, Am I audible?
operator
Yes. Can you speak a bit louder please?
Nihal Mahesh Jham
Hello?
operator
Yes, Nihal. Please go ahead. Nihal, we can’t hear you.
Nihal Mahesh Jham
I’ll just come back. There is an issue with my.
operator
We can hear you now. Please go ahead.
Nihal Mahesh Jham
Sorry for that. Hi Varun, My first question was just again asking on the margin bit, I do understand you mentioned about three levers of optimization and on the advertising bit it is absolutely clear in terms of the focus playbook that you’ve been mentioning. Just if you could just dive down on the other expenses. But just for an understanding perspective that what are the initiatives you are taking? And also on the gross margin side, I’m not sure if I’ve adjusted for the reporting change of last year, but I do see that this quarter there has been a bit of a contraction.
If Raman could just highlight that what is maybe the reason why the gross margins have adjusted and what are the initiatives you’re taking on the X of advertising side to keep margins improved.
Ramanpreet Sohi
Yeah, so actually if you look at like on a like for like basis, our gross margin is year only flat. And I think this is in line with our gross margin guidance that you know, we will continue to sort of look at 70% and 70% plus range. And of course there are other factors in gross margin which is category mix, seasonal category mix, brand mixes. And so that’s one piece on the gross margin side I think. On to other question on other expenses. I think largely other expenses are broken in two parts. One is large part of it is our supply chain distribution expenses.
And then there are of course typical fixed overheads, admin and infrastructure related expenses. Right. So when we see other expenses as percentage are improving the two levers there one of course given the scale of the business sequentially and year on year has increased, I think that’s leading to leverage in our fixed overheads. And of course as we become larger and also as certain channels like B2B offlink channels become larger, supply chain mix is also improving. That’s also leading to better expense as a percentage. So I think those are the two large levers. And as we as Varun mentioned, as we continue to sort of scale, I think we continue to drive some efficiencies across some of these levers.
Nihal Mahesh Jham
Got that. And this improvement of hundred bps that you are targeting, most of it will be driven by the optimization and advertising spend. Is that the better way to think about it or just other comments around it?
Ramanpreet Sohi
Well, actually it’s a mix, right? I mean some years it might be skewed towards NP and other years it might be skewed towards opex. But the combination of that should help us achieve the goals that we have set for ourselves.
Nihal Mahesh Jham
Got that? My last question was that over the course of the last few months with the two acquisitions that you’ve done, potentially we are now having a business that has eight brands. I know there is a big skew of how much Mama and DOMA go contribute, but just as an organization somewhere, you know, the thought would also come in that how do you then give the focus to each of these brands so that they all scale up. There is obviously a discussion happening about how the brands Exof, Mama Earth and Derma also scaling up. But how do then we keep our focus to see to it that you know, all these brands get the right element of growth.
And given the fact that even Mama Earth at this point in time is in the midst of a transition where you, you’re more or less done with the offline strategy but still there is an effort that is required to get that in place. So how are we sort of aligning to get the focus right given we now have such a wide portfolio of brands already in place?
Varun Alagh
I think we would want to keep our goal in front of us and make sure that we construct and structure the organization to achieve that goal rather than keeping our current situation in place and set our goals accordingly. So I think that’s our thinking. And in line with that, if we want to make sure we reach our long term goals of becoming the largest and the most loved BPC FMCG in India, we will need to make sure every category, every proposition, we have a brand that’s actually a market leader and to get to that whatever organization structure will help us serve that is what we will build.
And which is where there is separate ownership of each brand, of each channel which exists within the company where someone is losing their sleep over their own part and partitions and that’s what we would like to focus on because our long term goals are pretty hefty and we wouldn’t want to shortchange them based on where we are.
Nihal Mahesh Jham
Thank you.
operator
Thank you. Next question is from the line of Pratik from Bandhan AMC. Please go ahead.
Prateek Poddar
Yeah, I have three questions. One is just on mama. Could you confirm that the 10% growth is also coming from let’s say the same distributors also growing. And it’s. And, and it’s. And the penetration led growth is an addition to that. Is that a fair understanding?
Varun Alagh
Yes, actually. I mean 90% plus of the growth is from all current distributors only. It is not because of new distributor appointment. It is all on the back of the top hundred cities where we have our distributors increase especially in gt. And then of course in modern trade it is on account of the same large customers like Reliance, dma, Topolo which continue to exist. Right. And we’re gaining share within those customers and same is with E Commerce. It’s not in new channels, the same customers which have existed.
Prateek Poddar
It’s all repeats. Right Varun, that’s a fair understanding. Right? Most of it, 90% of it is.
Varun Alagh
Repeat repeats in the sense that, you know, I wouldn’t say, I mean we’re of course getting new consumers to buy us.
Prateek Poddar
I’m India. Yeah. Yeah. The second question was look, on a sequential basis the employee cost, although you talked about employee cost being a leverage item on a sequential basis and maybe short term employee cost has risen very sharply. Any one off to call out for or that’s the steady state run rate. Yeah.
Ramanpreet Sohi
Hi. So I think you know the Higher sequentially primarily because you actually had to do a ESOP provisioning. And it’s basically, you know, there is a large leadership ESOP pool, you know, and there’s a certain milestones aligned and we had to prepone a milestone this year and the allocation of that is actually that in H2 rather than H1 given the visibility of a certain milestone internally. So that’s why it’s showing on the higher side. It’ll be similar, broadly similar in H2 and then of course after that it’ll move back to the normal levels.
Prateek Poddar
So the entire delta is coming from.
ESOP cost, is it?
Varun Alagh
A lot of about entire delta which is some part of it is because of the ESOP cost. Some part of it again because of the better than planned performance of the variable enhanced variable also that we may see happening because people have done better and we could see the visibility of that only towards now. So we’ve taken that in Q3 and Q4.
Prateek Poddar
And last question. If I see your focus brands, they’ve grown at 25% whereas overall sales have been slightly lower. Right. What’s the share of non focus categories? Sorry, not brands, non focused categories. Now as a percentage of sales.
Varun Alagh
It’S still at 25% for the company. So 75% is focused categories and 25% is non focused categories.
Prateek Poddar
So despite being non focused, it looks like they’re still maintaining space with the overall growth. Is it? That’s why the share is not moving a lot.
Varun Alagh
In the sense it has gone up from a contribution perspective. But yes, the non focused categories are growing much lower relatively compared to the focus categories. And we see that to be the phenomena. The contribution over the year has come down by 500 basis points for the non focus categories, which is something that we expect every year to potentially.
Prateek Poddar
And in the next two, three years does this become quite immaterial for the company in the sense, is it a fair understanding that in the next three. Years. Focus categories kind of become like 90, 95% of the business?
Varun Alagh
I mean honestly, with the current pace of contribution increase, we expect it to get to about 85 to 87% over the next three years.
Prateek Poddar
Okay, thank you. Thanks.
Varun Alagh
And even within focus categories hero SKU contribution continues to increase. So.
Prateek Poddar
Yeah, that’s good. Thanks. Thanks.
Varun Alagh
Thank you.
operator
Thank you. Ladies and gentlemen. To ask a question, please press star N1 on your phone. The next question is from the line of Sukrit D. Patil from Eyesight Fintrade. Please go ahead.
Sukrit Patil
Good evening to the team. I have two questions. My first question to Mr. Varun is as honest as continues to expand across categories and geographies. What will be the key priorities under your long term and short term goals? How do you see the balance between scaling new brands, deepening distribution and sustaining profitability evolving over the next few quarters? That’s my first question. I’ll ask my second question after this. Thank you. I think.
Varun Alagh
You’Ve just elucidated on my business plan. Those are the three priorities that we continue to have which is continue to make sure our core mama earth grows in double digit. Continue to make sure our young brands deliver market leading performance and build new categories which can be future engines of growth for them. And continue to make sure our distribution, be it online or offline, is excellent and builds base for our brands to grow. I think we will need to balance all three together to make sure that growth and profitability both fall in line for the company and we’re quite confident in our team’s ability to do so.
Sukrit Patil
My Second question to Mr. Sohi is as the company plan forward, what financial guardrails will guide your decision on cost discipline, capital allocation and margin protection? How will the particular set of guidance influence the long term and short term earning stability and create shareholder value? I want to understand your plan of action on this particular thing. Thank you.
Ramanpreet Sohi
Yeah, sure. Thank you. So I think like Varun mentioned, I think the focus is to ensure that we continue to deliver market fitting growth and given the gross margin profile that we have as we continue to scale the business, improve our distribution metrics and deliver that. I think every year we will continue to unlock certain margins in the business which we spoke about. I think our endeavor is to unlock at least 100bps every year with a mix of both A and P and overheads. I think that will ensure that we continue to improve and deliver the right value to our stakeholders and deliver the right profit growth as we sort of move along in building this.
Sukrit Patil
Thank you and best wishes.
operator
Thank you. Next question is from the line of Akshay Krishnan from ICICI Securities. Please go ahead.
Akshay Krishnan
Hi team. Good performance and great set of numbers. So I just wanted to understand on the competitive intensity. So for the last two, three years we’ve been seeing that the fine sled and the active base positioning has becoming more of a mainstream among the peers and the large FMC players. So as you scale deeper into an offline and become more an omnichannel brand, how do you see the competitive game shifting on? An agility led disruption to scale and the distribution led competition. So I Just want to understand how is your strategy evolving in this context?
Varun Alagh
I’m. I’m so sorry, I. I did not understand the question completely.
Akshay Krishnan
I just. I just wanted to understand like you, you’ve been. Now you’re scaling more into an offline and I just want to understand how the competitive intensity shifting on the agility led distribution to scale and the distribution that be could competition. So what’s your strategy on this context? On this.
Varun Alagh
So I think firstly our offline and online both continue to grow strongly and deliver 20% plus growth for us. So it’s not, it’s not one or the other, but both are channels that we want to win in. In one case which is online, we are strong. We need to continue to hold and gain shares. In another case there is opportunity to just build distribution and be present in more outlets which we are doubling down on and hence we are largely looking at the opportunity and not the challenges as much because the opportunity seems to be so big that you know, that’s what energizes and excites us.
Akshay Krishnan
Because, because since you. I just wanted to double click on this because you have this early mover advantage and is it more towards on a margin or a volume profile? So that’s why I just wanted to double click on this.
Varun Alagh
No, of course, you know, in general as a system our margins are better than the legacy competition and our pool is better than the younger D2C brands. And I think that combination is helping us grow fast and gain share in offline both journal trade and we will continue to use that to our advantage to deliver competitive.
Akshay Krishnan
Okay, second thing is on the other brands now, with Mama Earth also stabilizing and Dermaco also scaling up strongly, the younger brands are growing up and with new initiatives like the prestige and oral beauty now, how are you internally practicing the capital and the management bandwidth to ensure that the focus doesn’t get diluted across much and you have the growth levers of the engine coming up.
Varun Alagh
I think firstly it’s important to structure yourself right where there are clear accountabilities and that’s an area where we continue to work on. Every year we have new learnings around how can we structure better to give focus and impetus to our. So management bandwidth actually goes firstly into the right organization design because if you can design right and put the right people into that design, then the design takes care of the outcome and that is what we spend a lot of our management on. Investment allocation is more based on the chessboard. I mean there are years where there might be Tailwinds in a certain category or a certain type of proposition or a brand and where you would want to use those tailwinds and gain disproportionately.
So that’s the decision that you would take. So that depends more on some of those externalities as well and based on which we take active decisions on allocation.
Akshay Krishnan
Okay, okay. And one final if I can squeeze in. So now with Mama expanding deeper into the and also the chemist channel, how do you preserve the brand premium? So when you scale up on a long term perspective, you intend to be a mass penetrated brand or structurally move up on the value chain. So I just wanted to understand the unit economics into this.
Varun Alagh
So we have maintained and will continue to maintain, you know, brand premium versus mass brands. That brand premium is visible in the PTML of our pricing in the market and it is also visible in the fact that we do not participate in the FMCG defined LUP spaces, which is the less than 20 rupee price point kind of spaces. Access into MAMA really starts from 100 rupees onwards, which is why there is that aspirationality maintained. It might limit the expansion opportunity that we’ll have from a gross generated perspective. But our long term view is that premiumization is going to be a mega trend in the country and brands which are able to hold aspiration will be able to gain much better share in the long term.
Akshay Krishnan
Perfect. And good luck and all the best. Thank you.
Varun Alagh
Thank you.
operator
Thank you. Next question is from the line of Jay Prakash from Accela Advisory Services llp. Please go ahead.
Jay Prakash Maheswari
Hello. Congratulations on the good set of numbers. So I wanted to understand, in increasingly competitive categories like sunscreen, some brands rely on indirect or ecosystem driven narratives rather than direct branded communication. How does the company ensure that any extended marketing ecosystem, agencies, affiliates or influencers operates within a defined compliance and reputational risk frameworks?
Varun Alagh
I think there are clear guidelines briefs which are in line with the ASCII guidelines that at least, you know, our company works on, whereby every brief that we issue has clear guidelines which are provided. Everyone who we work with is aware of those guidelines and we haven’t been flagged by the agency also on any such violation. So I think, you know, the content that we are at least doing must be in line with those guidelines, which is why we and we continue to absolutely follow.
Jay Prakash Maheswari
Okay. Okay. So there are oversight mechanisms within the company to monitor that, right?
Varun Alagh
Absolutely.
Jay Prakash Maheswari
Just another question. Can you break down what percentage of sunscreen growth is organic versus repeat? Organic repeat versus influencer driven first time conversion?
Varun Alagh
We don’t track that.
Jay Prakash Maheswari
Okay, so HUN is acquiring new age companies like Oziba and Minimalist. So does that deposit a threat for the business going forward.
Varun Alagh
On their business.
Jay Prakash Maheswari
Or our business on your business as those traditional business are modernizing very rapidly and they have all the guns out there to play it right?
Varun Alagh
No, honestly, we have always had competitive threat in the past as well, born in a category where there were much larger competitive than ours when we launched Mama Earth. And hence competition is not new to us. But we have always also taken a stand that it doesn’t sort of give you any joy or delta by focusing on competition. The real value gets created when you focus on the consumer and where the consumer is moving in terms of their preferences, be it product preferences, be it communication preferences, be it media preferences or distribution preferences. And I think for us that’s been a core focus area and I think we will continue to focus on that and we’ll rely on the fact that if you focus on that, consumers will reward us with choosing our brands.
Jay Prakash Maheswari
Okay, thank you.
operator
Thank you. Ladies and gentlemen. To ask a question, please press star and one on your phone. Now, As there are no further questions from the participants, I now hand over the call to the management for closing comments. Over to you.
Varun Alagh
Thank you. Thank you so much for asking these questions. It’s always refreshing to hear you. We continue to, as a team, execute our strategies to the hill. We are very confident that we will continue to delight you as we get into this year as well. Thank you so much.
operator
Thank you. On behalf of JM Financial Institutional securities limited that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.