Target: ₹130

CMP: ₹151.30

We recently interacted with FSN E-commerce Ventures (team Nykaa). Key takeaways from the interaction: Nykaa’s run rate of 4-5 million customer additions annually in BPC (on a cumulative base of 18 million) remains on track; ad income dip (as percentage of revenue) is attributed to teething issues with the new ad tech stack; recovery could be a quarter away; Fashion’s soft Q1 performance (12 per cent YoY) was an aberration and growth has been trending upwards; and fashion business is over its peak investment phase.

However, we suspect BPC cash generation is just about enough to fund growth in Fashion and B2B businesses in FY24. This could imply that measured growth in loss making units. (note: Nykaa Fashion’s debt has already tripled in FY23 to ₹420 crore).

While Nykaa remains an efficient online business, especially on the BPC side, its success in part is also due to the absence of potent competitors (this is gradually changing). Ex-ad income, the lack of non-linearity in monetisation capabilities restrict us from being constructive on the name.

Our Reduce rating stands with a DCF-based TP of ₹130 (implying 162x Sep-25 P/E). Estimates remain unchanged.

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