Nykaa hits lowest level since listing; stock slips 53% from record high

Shares of FSN E-Commerce Ventures (Nykaa) were down 1 per cent to hit a new low of Rs 1,206.90 on Friday, in an otherwise firm market.

The stock hit lowest level since its listing in November last year and was down the fourth straight day at Rs 1,206.90, falling 6 per cent, during the period. In comparison, the S&P BSE Sensex was up 1.8 per cent at 58,245 points at 01:36 PM.

With this recent fall, the market price of Nykaa has tanked 53 per cent from its record high level of Rs 2,574, which it had touched on November 26, 2021. The company made its stock market debut on November 10, 2021. Currently, Nykaa is trading 7 per cent higher than its issue price of Rs 1,125 per share.

FSN E-Commerce Ventures, more commonly known as Nykaa, is a consumer technology platform, delivering a content-led, lifestyle retail experience to consumers through its diverse portfolio of beauty, personal care & fashion products including their own brand products.

The company’s maiden bonus issue announcement failed to cheer the investors, which it had approved on October 3, in the ratio of 5:1 i.e. five bonus share for every one share held in the company. Since then, the stock has declined nearly 8 per cent. In the past three months, Nykaa has underperformed market by falling 15 per cent, as compared to 9 per cent rise in the S&P BSE Sensex.

While current inflationary pressures will affect consumer discretionary spends in the near term, the company said that the medium term and long-term growth of beauty & personal care as well as fashion remains strong.

"With the increase in disposable income in younger consumers, and online content-led discovery, beauty & personal care, wellness and fashion consumption is seeing increased share of the wallet," Nykaa said.

However, analysts believe that FSN E-Commerce Ventures’ omni channel play, Nykaa, is set to grow its Beauty and Personal Care (BPC) revenue 32.4 per cent higher in CY20- 25E despite 17.3 per cent CAGR likely decline in India’s online BPC market.

Nykaa may maintain its dominance with 26.8 per cent market share in online BPC, led by high repeat customers/usage base. Analysts at Elara Capital expect the company's growth outperformance to continue in the medium too, as Nykaa penetrates deeper in tier-2 and tier-3 cities in India.

"The key risks are high competition in BPC category with direct-to-consumer (D2C) brands. High competition in the fashion business as well with well established player such as Myntra already there in the category. The slow tech penetration may lead to lower transactions, which may in turn hit revenues. Fashion business is still in the nascent stage and may take some time to turn EBITDA positive," the brokerage firm said.