Does the stock deserve to fall by 20%? I mean, okay, numbers are bad, but they are not terrible.
Hemang Jani: So, the way the market has reacted, which means that there is a larger concern on the credibility of the numbers that the management has been giving and more so after delivering a very good growth in the last two quarters.Typically, for consumer companies you would not see this kind of major gaps versus expectations. Yes, I can understand that versus a certain growth that the market is expecting if there is a certain bit of disappointment, which has been the case with many consumer companies in this quarter.
But the way these numbers have been announced after giving the guidance, clearly there is a case of credibility issue to my mind. And the business model, we can all attribute this to the distribution channel, the disruption by Q-commerce, and many more things.
But at the end of the day, the company was getting a certain valuation and in the new scenario, current numbers and the outlook by the management, market will take a lot of time to kind of digest this kind of an accident. So, I would certainly think that there is a case for a significant de-rating as far as Honasa is concerned. How one should really be reading into this for the long term because Varun Alagh has actually said that this is a step back that they have taken in order to build stronger momentum for future breakthroughs and what does one do with the stock right now taking into account the commentary and the numbers?
Hemang Jani: So, the way I look at this is that this is not like a normal consumer company wherein there were certain expectations of growth and the company actually delivered lower growth because of either urban slowdown, etc, etc.
This is a case of hyped expectations by the promoters, by the analyst community, and trying to justify unreasonable and very high valuations. And now, there is an effort to kind of do some sort of a salvage by saying that, oh, the distribution model is not right; oh, there is a quick commerce which is leading to some sort of a disruption. In a bull market, in an exuberance phase, you will find many promoters, investment bankers who are trying to push through certain themes and narratives and this is just one such narrative.
If you actually do a ground level check, I honestly do not know how many people end up buying this kind of products at the ground level also which requires some sort of a detailed check. So, I definitely would avoid doing any sort of buying into this kind of companies. It is time to kind of do much more filter, much more detailed work in terms of what is really happening and then only take a call.