Nykaa expects FY23 revenue to be around 30%; stocks fall

Shares of FSN E-Commerce, the parent company of Nykaa, tumbled over 3% in opening trade on Thursday after the lifestyle-focused consumer company released business updates for the fourth quarter ended March 31, 2023. In a post market hour exchange filing on Wednesday, the fashion and cosmetics e-retailer said that it continued to display healthy revenue growth trends and expects FY23 revenue growth rates to be in the early 30%.

“In Q4 FY23, against the backdrop of subdued industry growth, tier 1 consumers have demonstrated sustained consumption. This has led to stronger revenue growth on the Nykaa platforms,” Falguni Nayar-led company said in a BSE filing.

During the quarter, Nykaa’s beauty & personal care (BPC) categories witnessed sustained strong demand, partly aided by the ‘Pink Love’ sale introduced during the quarter. BPC business has seen higher year-on-year growth rates in Q4 FY23 as compared to the year-on-year growth rates seen in Q3 FY23, it said.

As per the company, the operating parameters for the BPC business such as average order values and conversion rates have been robust which has aided growth in revenue, it added.

For FY23, the fashion e-retailer expects its percentage revenue growth rates to be in line with the ones seen in 9M FY23, early-thirties.

The release further stated that consumer pullback in discretionary spends has had some impact on its fashion business, leading to subdued growth in NSV this quarter. “For Q4 FY23, we expect our percentage revenue growth rates in the Fashion business to come through in the late teens. This comes on the back of our focusing on business efficiency and unit economics. Our average order values and conversion rates have improved steadily,” Nykaa said.

For FY23 at the consolidated level, the company expects to sustain its percentage growth rate in line with 9MFY23.

Following Q4 revenue updates, Nykaa shares opened marginally lower at ₹136.50 against the previous closing price of ₹136.55 on the BSE. In the first hour of trade so far, the stock declined as much as 3.2% to ₹132.20, while the market capitalisation slipped to ₹37,866 crore. 

The stock, which made its market debut in November 2021, has disappointing performance at domestic bourses, with the share price falling 55% in a year, 38% in six-months, and 11% in the last one month. The counter currently trades 10% higher than its 52-week low of ₹120.50 touched on March 31, 2022, while it hit a 52-week high of ₹315.86 on April 11, 2022.

Nykaa shares have witnessed selling pressure after the lock-in period for pre-IPO investors ended in November last year, even after the company issued bonus shares. Following the expiry of the lock-in period, private equity firm Lighthouse India, TPG Capital, Narotam Sekhsaria, and Mala Gaonkar offloaded their stake in the company through block deals, while Morgan Stanley, Aberdeen Standard Asia Focus, Canada Pension Plan Investment Board, and Norges Bank brought shares in the company.

For the third quarter ended December 2022, Nykaa recorded a 68% year-on-year fall in its net profit to ₹9.2 crore as compared to ₹29 crore profit in the year-ago period. The revenue for Q3FY23 was up 33% at ₹1,462 crore from ₹1,098 crore in the year-ago period. The expenses also rose 36% YoY to ₹1,455 crore in the October-December quarter as compared to ₹1,067 crore in the year-ago period.

As of December 31, 2022, Nykaa has increased its own physical store count to 141 stores, including three newly owned fashion stores, with a total area of 1.4 lakh sq. ft. across 56 cities. Besides, it has a total of 40 fulfilment centres across the country.