Nykaa trades lower for fourth straight day; slides 17% from lifetime high

The stock of the fashion and cosmetics online retailer was down 2.6% to Rs 2,135 on the BSE, having fallen 14 per cent in the past four trading days

Shares of FSN E-Commerce Ventures (Nykaa) were down 2.55 per cent at Rs 2,135 on the BSE in Tuesday's intra-day deal ahead of the lock-in period of anchor investors getting over. The stock of fashion and cosmetics online retailer was trading lower for fourth straight day, falling 14 per cent during the period.

The lock-in period for anchor investors will get over on Wednesday, December 8. The company had raised Rs 2,396 crore from anchor investors ahead of its initial share-sale last month. The company had allocated a total of 21,296,397 equity shares to anchor investors at Rs 1,125 a share, aggregating to Rs 2,395.84 crore.

With the past four days' decline, it has corrected 17 per cent from its high of Rs 2,574 hit on November 26, 2021. The stock hit a low of Rs 1,994.10 on its listing day i.e. November 10, 2021.

At 10:58 am, Nykaa was trading 1.5 per cent lower at Rs 2,158 on the BSE, as compared to 1.5 per cent rise in the S&P BSE Sensex. A combined 8.3 million equity shares had changed hands on the counter on the NSE and BSE.

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.

Nykaa had made a strong stock market debut as the shares had ended at Rs 2,207, a hefty 96 per cent premium over its issue price of Rs 1,125 per share, on the BSE. The company is among the top-50 most valued companies in terms of market captialisation in the country.

Nykaa's net profit fell 96 per cent to Rs 1.1 crore in the September quarter on a year-on-year (YoY) basis and 69 per cent, compared with the June quarter. Revenue from operations grew 47 per cent YoY at Rs 885 crore.

Nykaa's marketing and advertising expenses grew 286 per cent to Rs 121 crore in the September quarter, compared with Rs 31.5 crore in the year-ago period. The company said marketing and advertisement expense were higher on account of mass media marketing campaign aimed at building brand awareness and higher customer acquisition costs to acquire new customers. However, the company said its gross profit margin improved 345 basis points to 42.7 per cent in the September quarter.

The company's business depends on the growth of online commerce industry in India and its ability to effectively respond to changing user behaviour on digital platforms.

"If FSN is unable to manage its growth or execute its strategies effectively, its business plan and expansion may not be successful, and its business and prospects may be adversely affected. If the company fails to acquire new consumers or fails to do so in a cost-effective manner, it may not be able to increase revenue or maintain profitability are among key concerns," HDFC Securities had said in a IPO note.

"We are bullish on this counter and see it as a good bet for the long term. Investors might book some quantity considering the bumper listing premium and keep remaining shares for the long term.  Anyone who wishes to enter fresh shall wait for little declines near 1900-1850 levels.  Stop Loss - 1650 & target – 2600," Rahul Sharma, Co-Founder, Equity99 had said after bumper listing of Nykaa.

“Apart from leadership in online BPC in India, Nykaa is also one of the fastest growing fashion platforms in India based on GMV (Gross Merchandise Value). Nykaa’s key strengths lies in its inventory-led business model for BPC segment, which allows it to offer authentication for all its products and ensures availability and efficient distribution. We like Nykaa given its leadership position in online BPC market, customer centric approach, profitable tech platform and capital efficient business model,” Sneha Poddar, AVP Retail Research, Motilal Oswal Financial Services said post listing of the company.