Motilal Oswal starts Nykaa coverage, sees growth but near-term gains capped

Domestic brokerage Motilal Oswal has initiated coverage on FSN E-Commerce Ventures, better known as Nykaa, with a ‘Neutral’ rating, highlighting the company’s leadership in India’s online beauty and personal care (BPC) market while noting limited near-term upside in its stock.

 

Nykaa, a specialty platform for beauty and personal care products, commands an estimated 27 per cent share of India’s online BPC segment. Unlike generalist e-commerce players that compete primarily on logistics and discounts, Nykaa differentiates itself through content-driven discovery, brand trust, and authentic product offerings. Its inventory-led model, direct brand relationships, and omni-channel presence address the challenges of counterfeits and commoditisation that plague the broader market.

 

 

India’s BPC market is at a structural inflection point, analysts noted. Online penetration is expected to rise from approximately 22 per cent in FY25 to 35 per cent by FY30, while premium beauty products are growing faster than mass-market offerings. Nykaa, positioned at the intersection of these growth trends, is well placed to benefit from the shift from offline to online and from unorganised to organised retail.

 

According to Motilal Oswal, Nykaa’s BPC gross merchandise value (GMV) is estimated to grow at a 26 per cent compound annual growth rate (CAGR) over FY25-30E and 22 per cent over FY25-37E, supported by increasing online adoption and a higher premium product mix. BPC Ebitda is projected to grow at a 35 per cent CAGR over FY25-30E, fuelled by operating leverage and rising contributions from the company’s owned brands under the House of Nykaa portfolio.  ALSO READ | Motilal Oswal expects revival in luggage sector; retains Buy on VIP, Safari

House of Nykaa: Driving margins and customer loyalty

 

Nykaa’s private label strategy, under House of Nykaa, has evolved into a major profit engine. With an annual GMV of approximately ₹2,900 crore as of Q2FY26, brands such as Dot & Key, Kay Beauty, and Nykaa Cosmetics now account for around 14 per cent of BPC GMV, scaling faster than platform averages. These owned brands improve gross margins, reduce customer acquisition costs, and enhance lifetime value through higher repeat engagement.

 

The platform’s D2C approach provides a structural advantage i.e. brands gain discovery and scale, while Nykaa benefits from trust, authenticity, and exclusivity. Premium categories like skincare, cosmetics, and fragrances, which grow at 13-15 per cent CAGR, are particularly aligned with the company’s portfolio. Motilal Oswal notes that as D2C brands mature, Nykaa is increasingly becoming the distribution partner of choice, creating a virtuous cycle where platform scale attracts brands and exclusive brand partnerships drive traffic.

Fashion Biz: Strategic but secondary

 

Nykaa Fashion, though complementary, operates in a structurally different segment with lower customer loyalty, higher return rates, and greater pricing fragmentation. While the business is expected to reach Ebitda breakeven by FY26-27E, it remains an optional growth vector rather than a core valuation driver. Motilal Oswal sees its value primarily in serving high-intent, affluent consumers in Tier-1 and emerging urban markets, rather than competing with mass-market fashion players.

 

Fashion GMV is estimated to grow at 26 per cent over FY25-30E, with low single-digit margin expansion expected over FY25-37E. Its marketplace-led model keeps inventory intensity and working capital requirements low.  ALSO READ | Antony Waste soars 11%, Sanghvi Movers jumps 9% intraday; Key triggers here

Valuation and target price

 

Motilal Oswal values Nykaa on a sum-of-the-parts (SoTP) basis. For the BPC business, the brokerage applies a 50x EV/Ebitda multiple, reflecting leadership, superior margins versus horizontal platforms, and earnings visibility from owned brands, implying a per-share value of ₹255. The fashion business is valued via a discounted cash flow approach, contributing ₹31 per share. Adjusting for net debt, Nykaa’s target price is ₹280, representing an 11 per cent upside from current levels.

 

While the long-term fundamentals remain strong, Motilal Oswal cautions that much of the growth trajectory is already priced in, limiting near-term upside and prompting the ‘Neutral’ rating.

 

With around 18 million transacting customers and steady additions expected over FY27-FY28, Nykaa is well-placed to benefit from rising online penetration, premiumisation, and the proliferation of D2C brands. The brokerage stresses that the company’s BPC leadership, exclusive brand partnerships, and growing owned brand contribution make it a differentiated platform in India’s rapidly evolving e-commerce landscape.

 

Disclaimer: The stock target/outlook has been suggested by Motilal Oswal. Views expressed are their own.