Honasa Consumer Ltd, Mamaearth‘s parent company, has been directed by a UAE court order to pay compensation totaling INR 56.6 Crores to a former distributor. This development comes just ahead of the company’s earnings call for the fourth quarter of FY24.
The United Arab Emirates’ Court of full Commercial Jurisdiction-(Court of First Instance) Dubai has ordered Honasa to compensate RSM General Trading, its former distributor in the Middle East and Africa markets, for improper contract termination.
RSM General Trading served as Honasa’s distributor from July 30, 2020, until January 17, 2023.
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In a filing with the exchange, the company stated that on May 16, the court issued an order to pay its former distributor a fine of AED 25.07 million, equivalent to approximately INR 56.6 crores, as compensation. Additionally, the court mandated a legal interest rate of 5% from the date the judgment becomes final until full payment is completed, along with AED 1,000 (INR 22,665) as attorney fees.
Nevertheless, Honasa stated that it considers the court’s decision to be without merit and therefore insignificant to its operations.
“The Company holds the view that the judgment lacked merit and was erroneous, as it failed to properly consider the facts and submissions presented by the Company. Consequently, the Company is currently in the process of filing an appeal with the Court of Appeal (Dubai) to contest the ruling issued by the Court of First Instance,” stated the company.
Honasa terminated its partnership with the distributor a few months before its public listing in India. Prior to being listed in November 2023, the company had intentions to bolster its international expansion endeavors, with a focus on Bangladesh, Malaysia, Vietnam, and Thailand.
During that period, the company was actively seeking to broaden its footprint in the UAE through strategic acquisitions or organic growth. However, these initiatives appeared to have been delayed as a result of the termination of the contract with RSM General Trading.
Currently, it remains uncertain whether Honasa has ventured into international markets with alternative distributors.
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In addition to the flagship brand Mamaearth, Honasa possesses and manages The Derma Co, Aqualogica, Ayuga, Dr. Sheth’s, BBlunt, and Momspresso. However, Momspresso was closed down prior to the IPO.
Following its initial public offering, Honasa has experienced a robust surge in profits. In the third quarter of FY24, it recorded a remarkable 264% rise in its consolidated net profit, climbing to INR 25.9 Crores from INR 7.1 Crores in the corresponding quarter of the previous year.
Nevertheless, this represented an 11% sequential decrease from the INR 29.4 Crore profit it reported in the preceding September quarter.
