Nykaa shares hit all-time low! Is there more pain ahead?

Of late, the shares of Nykaa (listed as FSN E-Commerce Ventures Limited) have been under tremendous selling pressure. The stock crashed 4 per cent to hit an all-time low of Rs 1,337.45 on BSE. Market cap of the firm slipped below Rs 65,000 crore.   The stock opened a tad lower at Rs 1,395 against the previous close of Rs 1,399.25 on BSE but extended losses and crashed 4 per cent in the early trade. It touched an all-time high of Rs 2,574 on November 26, 2021 and has tanked over 48 per cent from its all-time high.   Nykaa shares got listed at a premium of 79 per cent to the issue price, marking a strong listing for the online beauty retailer. The company made its market debut at Rs 2,001 per share on the BSE against the IPO issue price of Rs 1,125. The market cap of Nykaa breached the Rs 1 lakh crore mark after the stellar listing of the company on BSE and NSE.   "Influencer marketing and the digital market are the two main drivers of sales for the firm. Because of a 155 per cent year-over-year increase in marketing expenses, the margin has been severely damaged," Ashis Sarangi, SEBI Registered Investment Advisor at Pickright Technologies told BusinessToday.in.   "This spending has resulted in a 49 per cent increase in revenues and a 44 per cent increase in transactions. Investors seeking a new entry point should hold off for a while longer, as there are many better equities available now on a risk-reward basis. Existing investors can keep their positions and wait for the price to average out," he added.   The company posted a weak set of numbers for the quarter ended December 2021. FSN E-Commerce Ventures, the parent company of online beauty e-commerce platform Nykaa, reported a 58 per cent year-on-year (YoY) decline in its consolidated net profit for October-December at Rs 29 crore. Its net profit stood at Rs 1.2 crore in the preceding September quarter.

However, revenue from operations grew 36 per cent YoY and 24 per cent quarter-on-quarter (QoQ) to Rs 1,098.4 crore from Rs 808 crore in the October-December quarter of 2021.   "Cosmetics had suffered due to COVID-19. Those things have started coming back but we don't believe it is back to the pre-COVID-19 level of consumption," Nykaa Executive Chairperson, MD and CEO Falguni Nayar told PTI.

She said that last year, the company had put a brake on marketing expenses due to COVID-19 and, hence, this is a one-time impact that has reflected on the third quarter.