Shares of Nykaa’s parent company, FSN E-Commerce Ventures Ltd., have fallen nearly 35% since listing on November 10, amid widespread market catastrophe that has weighed on shares of technology companies as interest rates set by inches. Huh. Everywhere in Nevertheless, investors in Nykaa’s shares are sitting at a gain of about 28% from the issue price. 1,125 each during its initial public offering.
However, sentiments for the stock can be expected to remain muted in the near term, as analysts are taking more losses from new verticals, which include the e-B2B business, Nykaman and other international brands. Nykaa continues to diversify its portfolio.
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Last week, at its first Investor and Analyst Day, it elaborated on its e-B2B platform, ‘Superstore by Nykaa’, which has 45,000 transactions as of May 2022. Here, the company sees potential for $3-4 billion in gross merchandise. value (GMV) and mid-single-digit EBITDA margin. GMV is the value of the order.
Investors will be watching the profits of Superstore. For example, new verticals, e-B2B business, Nykaman and other international brands were in the red with Ebitda losses in FY22. Analysts at Kotak Institutional Equities expect losses from the new verticals to double in FY23 before stabilizing in FY24 and subside later as channel economics improve. , 100 crore in terms of Nykaa is quite a big loss and cuts the FY2023-25 per share forecast by 17-27%,” the analysts said in a report on June 24.
Nykaa’s expansion into other verticals means the beauty and personal care segment’s contribution to the consolidated GMV in FY22, which was 6,933 crore, down from 98% in FY19 to 72%.
Moreover, Nykaa’s fashion segment, where it is a relatively new entrant, is still yet to break even at the Ebitda level and posted losses in FY22. 68.2 crores. The company is expanding its presence in the fashion business, but given the high competitive intensity in this segment, customer acquisition costs are likely to keep the segment’s profits low in the near future. In FY22, the fashion business constituted 25% and 8.6% of the consolidated GMV and revenue, respectively.
Nykaa aims to bridge the gap in the online fashion market. At its analyst day, it reported that customers accepted the company’s different approach, which focuses on assortment. It also said that customers feel overwhelmed by the large number of stock keeping units on other platforms, which means searching extensively to find the right product.
Meanwhile, it remains to be seen how Q1FY23 shapes up as discretionary spending would have been impacted amid higher inflation levels. Analysts said an increase in company-specific metrics would lead to a meaningful rally in the stock.