FSN’s E-Commerce Ventures – BusinessToday

Nykaa, India’s largest online beauty and beauty retailer, recently hosted its annual Investor Day and management expects its BPC business to grow in the mid to late 2020s, growing annually in the 24–28. Nuvama Institutional Equities, which participated in the analyst meeting, said the company’s ambition is to increase the net sales value (NSV) of the fashion industry by 2.5-3 times over the next three years.

Among other things, Nykaa is aiming to bring BPC margins closer to current levels while expecting the Fashion segment to break even by FY26. Nykaa believes that capital expenditure has peaked in FY23 and is expected to decline in India , while the GCC region will need USD 3-5 million in capital expenditure in the short term to support growth.

Nykaa management will focus on growth by investing in the business as it sees improved profitability due to improved business economics in the fashion and retail industries.

Following this, Nuvama reiterated its ‘Buy’ rating on Nykaa and suggested a March 2025 target price on a DCF basis of Rs 203.

Given the company’s faster growth in the Fashion industry, the overall Fashion industry share will grow by 21 percent in FY29 from 16 percent of NSV in FY24, Nykaa expects.

One of the few profitable new-age companies, it plans to grow gross merchandise value (GMV) at a 40% CAGR over FY24-28E as it plans to expand its store count from 187 stores in FY24 to over 400 by FY28.

“Super Store (eB2B segment) has a strong reputation, Nykaa intends to grow Super Store to 9x by FY2024 in the medium term and expects EBITDA margin of 3-5% upon scale-up,” Nuvama said.

The company’s management plans to maintain the contribution margin in the BPC business at current levels and invest additional savings back into the business to support growth.

Nykaa expects Ebitda margin to improve by 1,300-1,600 basis points by FY27. It has also mapped out a collective path to achieve this improvement: margins improved from the current level of -10.3% to break-even in FY26 and then to mid-single digits in FY27 and 10% in the medium term under stable conditions.

“Unlike BPC, Fashion has a niche positioning focused on curation and management plans to continue this. While this will reach a limited scale, it offers a potential path to profitability, and achieving this we believe will be of significant value
driver,” it was written.