Nykaa stock up 3% in intra-day trade as company hosts first analyst meet

Online beauty and cosmetics retailer Nykaa’s share prices surged nearly three per cent in the intra-day trade as the company held its first investor meet to discuss its business and strategy going forward. The company’s share closed at Rs 1,435.75 per share, up 0.56 per cent from the previous close.

The detailed discussion and disclosures by the Nykaa management have been appreciated by the analyst community. “At a time when most consumers and Internet firms find excuses for poor disclosures, sometimes under the garb of ‘competitive reasons’, Nykaa stands out. The company adhered to strong disclosures since the listing and its maiden analyst met on the same principle, “said a note by Jefferies.

Analyst reports point out that Nykaa is in a good position to expand its position in both the organic and unorganized segments. The firm’s transacting customer base grew by 50 per cent to touch 8.4 million in FY22.

The management said that apart from focusing on onboarding customers and growing its assortment of brands and products, the next big focus area is eB2B or the superstore segment. The firm aims to replace the distributor and wholesaler in this segment and connect with non-kirana retailers, including pharmacies and salons.

According to the company’s presentation, consumption of 41-50 per cent will continue to come from unorganized trade, while the overall market will grow by 12 per cent. However, this segment is dominated by large FMCG brands and by D2C and luxury brands are not invested in the distribution infrastructure.

“Even by 2025, 41-50 per cent of the BPC market in India is expected to come through unorganized trade and this segment will enable Nykaa to play in the entire pie of beauty market in channels across India. Through Superstore by Nykaa, the company hopes to create a win-win for brands, retailers, consumers and Nykaa, “said a report by JM Financials.

Nykaa mentioned in the presentation that eB2B will be a tech play.

The company said that while it is still early days, the results have been promising. Nykaa’s superstore already has 45,000 transaction retailers from 500 cities, a growth of 18x between October 21 and May 22. Moreover, the GMV from this segment has grown 20x.

“The company started last year and has been able to forge strong relationships with leading & emerging BPC brands. This could be a $ 3-4bn GMV opportunity and an ultimate potential mid-single digit margin, something that we have discussed at length in our report. However, Nykaa’s right to win is still not clear as yet, “said the Jefferies report.

The management outlines the strategy and evolution of beauty and personal care (BPC) and drives the growth of fashion segments through deep brand relationships, scaling the portfolio of owned brands and enhancing the physical network of stores and warehouses. The company has opened 105 physical stores for BPC and also plans to start opening fashion-oriented stores exclusively as well as multi-brand outlet formats.

Over 3.1 million unique shoppers purchased Nykaa’s BPC owned brands, accounting for 11.2% of BPC GMV in FY22. Makeup and cosmetics account for one-third of everyone’s personal care including BPC GMV, haircare and others, fragrance mom & baby etc continue to account for incrementally larger share of business.

FY22 data

GMV: Rs 49,98.7 cr; up 49% yoy

Annual Unique transacting customers: 8.4 mn

New customers added in FY22: 4.4 mn

Monthy average unique visitor: 20.8 mn

Orders: 27 mn

Brand partners: 3,000-plus

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