Honasa was ordered by a UAE court to compensate a former distributor for unlawful contract termination, totaling INR 56.6 Cr. RSM General Trading was Honasa’s distributor in the Middle East and Africa markets from July 30, 2020 to January 17, 2023. The BPC major is poised to fight the court’s ruling, claiming that it is unjustified.
A day before the business’s fourth-quarter earnings conference, Mamaearth‘s parent company Honasa Consumer Ltd reported that it had received a UAE court order mandating it to pay INR 56.6 Cr to a former distributor.
Honasa has been ordered by the UAE’s Court of Full Commercial Jurisdiction (Court of First Instance) in Dubai to pay compensation to RSM General Trading, its former distributor in the Middle East and Africa markets, for illegal contract termination.
Honasa’s distributor was RSM General Trading from July 30, 2020 to January 17, 2023.
The company said in an exchange filing that the court ordered it to pay its former distributor AED 25.07 Mn, or about INR 56.6 Cr, as compensation, plus AED 1,000 (INR 22,665) in attorney fees and legal interest at the rate of 5% (from the date the judgment becomes final until full payment is made).
Honasa, on the other hand, claims that the court’s verdict is without merit and hence irrelevant to its operations.
“…The Company considers that the judgment was devoid of merit and erroneous because it failed to adequately evaluate the facts of the case and the Company’s objections. As a result, the business is in the process of submitting an appeal with the Court of Appeal (Dubai), disputing the decision of the Court of First Instance,” the business stated.
A few months before Honasa went public in India, the company cut its connections with the distributor. Prior to its IPO in November 2023, the firm planned to increase its international expansion activities, with a focus on Bangladesh, Malaysia, Vietnam and Thailand.
It was trying to increase its presence in the UAE at the time through strategic acquisitions or organic growth. These ambitions appear to have been put on hold after the corporation canceled its contract with RSM General Trading.
As of now, it is uncertain whether Honasa has entered international markets with additional distributors.
Honasa also owns and operates The Derma Co, Aqualogica, Ayuga, Dr. Sheth’s, BBlunt, and Momspresso, in addition to its flagship brand Mamaearth. Momspresso was one of these companies that was shut down prior to its IPO.
Honasa’s profits have increased significantly since it became public. Its consolidated net profit increased by 264% to INR 25.9 Cr in Q3 FY24, up from INR 7.1 Cr the previous year. However, this was an 11% sequential fall from the INR 29.4 Cr profit generated in the previous September quarter.
