Varun Alagh on D2C Economics

Varun Alagh serves as Chief Executive Officer of Honasa Consumer Ltd, India's largest digital-first beauty and personal care (BPC) company. Before founding Honasa, he spent nearly two decades at leading FMCG multinationals — Hindustan Unilever, Diageo and Coca-Cola — building expertise in brand management, marketing leadership and business strategy.

Honasa claims to have systematised a 'repeatable brand-building playbook' anchored in consumer-centric innovation, digital-first distribution and data-driven marketing. That framework reportedly enabled each of the new brands — The Derma Co., Aqualogica, Dr Sheth's, BBlunt — to scale to a ₹100 crore annual revenue run rate within two years of launch, evidence of the platform thesis producing measurable output.

Honasa became India's first unicorn of 2022 in January that year, raising $52 million led by Sequoia at a $1.2 billion valuation — a milestone the company frames as validation of rapid growth and category leadership, even though the same valuation benchmark would later become politically charged during the IPO debate.

Varun led Honasa through its initial public offering in November 2023, with the IPO oversubscribed 7.61 times. The offer opened on 31 October 2023 and closed on 2 November 2023, with shares listing on BSE and NSE on 7 November 2023 at a market capitalisation of roughly ₹10,425 crore, making Honasa at the time the youngest Indian unicorn to list publicly.

By January 2024, Mamaearth had opened its 100th Exclusive Brand Outlet (EBO) at R-City Mall in Mumbai — achieved in under three years since the first store opened in early 2021. Honasa positions this as a key step in its omnichannel evolution, supplementing distribution across 100,000-plus FMCG retail outlets and 18,000-plus pin codes in 700-plus districts.

Mamaearth's IPO became a referendum on India's tolerance for high-valuation startup listings. Founded by the husband-wife duo of Varun and Ghazal Alagh in 2016, the brand had crossed 5 million customers within two years and turned over ₹100 crore within four, becoming one of India's fastest-growing consumer brands and earning unicorn status before the public offer.

Mamaearth's parent, Honasa Consumer Limited, filed its Draft Red Herring Prospectus with SEBI late in 2022 for an IPO comprising a fresh issue of ₹400 crore and an Offer For Sale of 46.82 million equity shares. The DRHP immediately drew criticism from finance professionals and entrepreneurs on LinkedIn, who seized on the reportedly sought $3 billion valuation as out of line with fundamentals.

The valuation gap sat at the centre of the controversy. In January 2022 Mamaearth was valued at $1.2 billion. A year later, the DRHP-anchored IPO ambition was reportedly around $3 billion (roughly ₹24,985 crore). Critics pointed out that this translated to a multiple of more than 1,000 times FY22 profit of ₹19.86 crore — a ratio that invited direct comparisons with the post-listing collapses of Zomato and Paytm.

Advertising efficiency became the second flashpoint. Mamaearth reportedly spent about 40% of revenue on marketing with a Return on Advertising Spends (ROAS) of roughly 2.6, compared to Nykaa's 7.8 and Hindustan Unilever's 10.6. That gap raised the question of whether the brand's growth was sustainable without continued heavy ad-spend reinvestment — a structural challenge for D2C brands at scale.

Kuruganti further questioned the marketing math: Mamaearth's FY22 marketing expenditure was roughly ₹391 crore against sales of ₹932 crore — implying Honasa was spending around 40% of revenue on advertising. He flagged that Honasa itself disclosed plans to deploy roughly ₹186 crore of IPO proceeds for marketing, raising concerns that public-market money would fund ongoing ad-spend rather than capacity-building.

The IPO itself was ultimately subscribed 7.61 times over a three-day window, but retail investors subscribed only 1.35 times — a notably muted retail response relative to institutional interest. The stock listed at a small premium of roughly 1.8%, signalling that the market had repriced the IPO narrative away from the original $3 billion ambition.

A second critique was structural: Kuruganti argued Mamaearth was 'no longer a D2C brand,' pointing to a sharp shift in offline channel contribution from 9% in 2020 to roughly 35% in the prior six months. His objection: you cannot ask for a D2C valuation multiple while explicitly planning to derive 70% of business from offline channels in the near term.

Honasa's revenue trajectory was cited as both a strength and a weakness: revenue from operations moved from ₹1,097.84 million in FY20 to ₹4,599.9 million in FY21 to ₹9,434.65 million in FY22 — a 4.2x step-up then a 2x step-up. Strong growth, but critics argued the growth had been purchased with disproportionate ad-spend, not earned through durable brand equity.

A broader portfolio context fed the IPO story: by listing time Mamaearth was the flagship inside a 'House of Brands' that included BBlunt, The Derma Co., Dr Sheth's, Aqualogica and Ayuga, all under parent Honasa Consumer Ltd, with the combined entity crossing ₹1,500 crore in revenue in roughly seven years — material scale, but not enough to silence the profitability-valuation debate.

Chartered Accountant Anamika Rana of Arika Consultancy noted that the asking valuation implied roughly 1,000x FY22 net profit of ₹14 crore, and that IPO proceeds were earmarked for advertising expenses, opening new BBlunt salons and setting up exclusive brand outlets. The implied capital allocation was, in her view, weighted toward marketing and physical retail rather than toward R&D or capacity — fuelling the overvaluation verdict.

The article frames the LinkedIn backlash itself as a market signal — finance professionals and operators publicly dissecting the DRHP and translating its arithmetic for retail investors. The intensity of the critique foreshadowed the muted retail subscription (1.35x) at IPO time and the small listing premium, both of which validated the critics' central thesis on valuation.

In this 2022 interview, Varun frames Honasa's expansion into a House of Brands around two structural shifts: a decade-long consumer transition from family-level to individualised consumption, and Honasa's own internally-built capabilities across R&D, innovation, D2C, millennial marketing and content-to-commerce. Together, he argues, these justify the platform strategy as a way to capture a larger share of the Indian consumer wallet.

On the offline-versus-online split, Varun acknowledges that the larger share of category transactions still occurs in physical retail. He announced plans to add roughly 40,000 stores to the offline footprint in that year, having just opened exclusive brand outlets in Delhi, Gurgaon, Noida and Mumbai. Online contributed roughly 70% of revenue and offline 30% at the time — a ratio that would later feed the IPO-era critique that Mamaearth was no longer truly a D2C brand.

Tier-II and beyond markets emerge as a central growth axis: Varun reports that more than 50% of total sales come from these towns, served across roughly 19,000 pincodes, with active offline expansion targeting the same geographies. This refutes the assumption that premium D2C beauty was metro-only and explains Honasa's broad-based reach claim.

Varun positions data and technology as the differentiator at the core of Honasa's model, claiming consumer data on more than 10 million individuals for targeting and engagement. The thesis is that the D2C relationship generates first-party data that improves marketing efficiency and new-product hit rate — a self-reinforcing loop that traditional FMCG cannot replicate.

On financial trajectory, Varun reports Honasa hit a ₹500 crore run rate in FY21 and doubled that in FY22, with the explicit ambition to keep growing 'disruptively' in subsequent years. He sets a long-term vision of building a beauty and personal care company larger than some existing incumbents by the end of the decade — a goal that framed the IPO as a milestone, not an endpoint.

Within five years of founding, Honasa had built a product portfolio of more than 120 products sold across 500-plus Indian cities — figures Varun uses to validate the speed of the playbook. The breadth underscores how the platform was designed for fast SKU expansion rather than a single hero product.

On the marketing playbook, Varun is emphatic that purpose, sustainability and being toxin-free drive brand conversations, and that millennials trust other millennials — making influencer marketing the most important channel for the company. Honasa works with thousands of influencers each month and intends to keep doubling down on that channel, an approach that subsequently drew scrutiny for its high advertising-to-revenue ratio.

The interview also reveals Honasa's app play, with more than 10 million downloads on its own D2C channel — a not-insignificant direct-owned audience that, when combined with first-party data, gives Honasa a relatively defensible position independent of marketplace platforms. This owned-channel ownership is a quiet but material part of the long-term moat claim.

Varun's stated long-term ambition — to be 'the first choice of evolving Indian millennials and GenZ' in beauty and personal care — frames Honasa as positioning around demographic capture, not product category. The strategic target is a generation, and the portfolio is built backward from that consumer, not forward from a single product idea.