Nykaa plunges 36% in 11 days post Q3 results; stock nears issue price

The stock hit a new low of Rs 1,218.80, down 8 per cent in the intra-day trade

Shares of FSN e-Commerce Ventures, the parent company of beauty e-tailer Nykaa, hit a new low of Rs 1,218.80 after it slipped 8 per cent on the BSE in Tuesday's intra-day trade. The stock was inching closer to its issue price of Rs 1,125 per share and has corrected 53 per cent from its record high of Rs 2,574, touched on November 26, 2021. The company had made stock market debut on November 10, 2021.

The stock of the cosmetics-to-fashion retailer has tanked 36 per cent in the past 11 trading days after the company reported a disappointing set of numbers. It's net profit declined 58 per cent year-on-year (YoY) in its December quarter (Q3FY22) at Rs 29 crore, hit by a jump in expenses and subdued demand for personal care and fashion products. Employee costs in the quarter increased by 56 per cent YoY. The marketing expenses increased by 155 per cent YoY on a low base of FY21, where marketing expenses were curtailed due to Covid.

Revenue from operations of the company grew 36 per cent YoY at Rs 1,098 crore. Earnings before interest tax and depreciation and amortization (EBITDA) margin contracted 697 bps at 6.3 per cent from 13.2 per cent in Q3FY21. On a sequential basis, EBITDA margin improved 302 bps from 3.3 per cent in Q2FY22.

For the first nine months (April-December) of FY22, Nykaa reported 23 per cent YoY decline in PAT at Rs 33.7 crore. EBITDA margin declined 213 bps at 4.5 per cent from 6.6 per cent in same period of FY21. Revenue from operations, however, rose 65 per cent YoY at Rs 2,801 crore.

Likely increase in competitive intensity, with Tata, Reliance, Purplle, MyGlamm and Myntra vying for an aggressive ramp-up, is the key risk to Nykaa's growth, analysts at IIFL Securities said in a result update.

Analysts at Kotak Securities, meanwhile, have trimmed FY22-24 revenue forecasts by 2 per cent based on the 9MFY22 performance, largely on lower Beauty and Personal Care (BPC) revenues. The brokerage firm believes ad-spends will stabilize at 11-12 per cent of revenues in the next 2-3 quarters though quarterly volatility will remain.

Meanwhile, foreign portfolio investors (FPIs), who are continuously selling shares in Indian equities, are the second largest public shareholders in the company. FPIs held 5.73 per cent stake in Nykaa at the end of December 2021 quarter, the shareholding pattern data shows.