Nykaa’s Q1FY27 earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin was 8.5 per cent, up 196 basis points (bps) year-on-year (Y-o-Y), and revenue was ₹2,780 crore, up 29 per cent Y-o-Y. The Ebitda was ₹240 crore, up 68 per cent Y-o-Y. The raw material-sales ratio was down 120 bps quarter-on-quarter (Q-o-Q) at 54.1 per cent, and marketing costs were 14.8 per cent of operational revenue. The Ebit margin was at 5.3 per cent. The net profit was at ₹79.8 crore, up 226 per cent Y-o-Y. The gross merchandise value (GMV) rose 34 per cent Y-o-Y to ₹5,590 crore, about 3 times the level from three years ago. Gross profit rose 33 per cent Y-o-Y to ₹1,276 crore.
There was high customer acquisition across both verticals — Nykaa (Beauty and Personal Care) and Nykaa Fashion. The beauty and personal care (BPC) and fashion AUTC (annual unique transacting customers) grew 26.1 and 38.2 per cent, respectively, Y-o-Y. The BPC revenue grew 27.4 per cent Y-o-Y to ₹2,520 crore, and fashion saw 48 per cent Y-o-Y revenue growth to ₹253 crore.
The gross margin rose 123 bps Y-o-Y to 45.9 per cent. The BPC Ebitda margin as per cent of net sales value (NSV) rose 130 bps Y-o-Y to 10.3 per cent, while fashion hit near breakeven Ebitda at 0.1 per cent margin versus minus 6.2 per cent in Q1FY26.
The customer base is around 60 million, up 33 per cent Y-o-Y. Artificial intelligence (AI) initiatives are driving better conversion as well as resolving 50 per cent of queries and aiding beauty advisory. Nykaa now has over 10,000 brands. In BPC, average order value (AOV) was up 5 per cent Y-o-Y.
The company launched a 5,000 square feet (sq ft) store in Delhi. Nykaa Now (quick commerce vertical) plans to cover over 25 cities by end-FY27. The physical network is now 324 stores in 105 cities, with more than half the stores in Tier-2 and Tier-3 cities. The retail space is up 29 per cent Y-o-Y to 330,000 sq ft, and same store sales growth is in double digits.
For Nykaa to sustain growth plus margin expansion, it will need a strategy of more premiumisation, more brand partnerships, and a scaleup of owned brands, and more physical expansion into Tier-2 and Tier-3. Ebitda margins will be driven by premiumisation and AI-led cost efficiency. Revenue growth could be over 20 per cent in the medium term and high teens through the long term. There’s room for Ebitda margins to double from current levels to around 17 per cent.
The fashion vertical reported a contribution margin of 11.4 per cent and the Ebitda margin for the fashion business was 0.1 per cent. This is where investors expect big margin improvements. The GMV grew 53 per cent Y-o-Y to ₹1,471 crore, with NSV up 54 per cent Y-o-Y to ₹451 crore, a multi-quarter high. The Ebitda-positive margin of 0.1 per cent represents 627 bps Y-o-Y improvement. This is mostly aided by a 534 bps improvement in marketing and sales & delivery efficiency, and 292 bps improvement in overhead costs. The customer acquisition cost has dipped 30 per cent over the last two financial years, with visitor-to-order conversion improving 70 bps Y-o-Y to 4 per cent.
Premiumisation in BPC is visible in improving AOV. Fashion has higher growth rates off a lower base, with GMV growth of 53 per cent Y-o-Y and NSV growth of 54 per cent Y-o-Y. This is the second consecutive quarter when fashion has achieved Ebitda breakeven. It is possible fashion could maintain 40 per cent revenue growth through the medium term with improved margins. If fashion margin picks up to an achievable 10 per cent in the medium term, it would multiply Ebitda. The return on capital employed (ROCE) at 26.8 per cent is good. Overall, net profit margins of between 3.5 per cent and 5 per cent may be achievable in FY27 and FY28.
These are high competition verticals. But Nykaa has built a moat in BPC, with 10,000 brands, 324 stores, and many brand partnerships. In fashion, it is looking at big partnerships such as with Nike, H&M Move, and Birkenstock.
The Nike direct-to-consumer (D2C) partnership (the Nike app is fully operated by Nykaa Fashion) crossed 1.5 million app installs within six months of launch, and Nike is among the top-3 brands on the Nykaa Fashion marketplace. The AI-powered "Virtual Closet" feature (launched in May 2026) has generated over 200,000 virtual avatars and delivered much higher conversion in its initial months.
The big question mark is that Nykaa has high valuations. Any minor hiccup in growth or a profitability slowdown could result in a price correction, which may provide a more comfortable entry point.
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