Long-Term Growth Trajectory Intact Despite Inflationary Pressure: Nykaa

SUMMARY

In its annual report for FY22, Nykaa MD & CEO Falguni Nayar said that long-term drivers of retail consumption in India present an immense opportunity for growth in the coming years

The stable positive movements in growth and profitability of beauty and fashion business, and ability to effectively diversify gives confidence on long-term sustainability: Nayar

In FY22, Nykaa’s consolidated profit after tax declined 33% to INR 41.3 Cr, while its operating revenue jumped 55% to INR 3,773.93 Cr

Beauty ecommerce platform Nykaa is positive about its long-term growth trajectory even as the rising inflation poses downside risks to the startup in the short-term.

In its annual report for financial year 2021-22 (FY22), Nykaa MD and CEO Falguni Nayar told shareholders that India is poised to see rapid positive shifts in the lifestyle categories in the mid- to long-term period. The startup is set to benefit from the long-term positive market dynamics despite the short-term challenges such as the current inflationary pressures that continue to affect consumers’ discretionary spending.

“Long-term drivers of retail consumption in India present an immense opportunity for us in the coming year and beyond – rising per capita incomes, urbanisation, the unprecedented adoption and usage of internet and digital platforms,” said Nayar in her letter to the stakeholders.

“The stable positive movements on growth as well as profitability over the last few years in our core beauty and fashion business as well as our ability to effectively diversify and extend to new categories and platforms gives us confidence in our future momentum and the long-term sustainability of our performance,” she added.

Nayar also noted how the second wave of the Covid-19 pandemic had disrupted the business last year, and despite a challenging operating environment, Nykaa posted a consolidated GMV growth of over 71% to INR 6,933 Cr.

In FY22, Nykaa’s consolidated profit after tax declined 33% to INR 41.3 Cr, while its operating revenue jumped 55% to INR 3,773.93 Cr. Its operating expenses rose 87% to INR 1,480.7 Cr.

“With a focus on long term growth and profitability objectives, we made significant investments through the year towards technology, operational readiness, and future growth drivers including customer acquisition, new geographies and businesses,” Nayar noted further in Nykaa’s annual report.

It is pertinent to note that Nykaa has been on an acquisition spree to expand its product portfolio. In October 2021, it announced acquisition of a 51% stake in Dot & Key, adding to its skincare offerings. In April last year, Nykaa acquired online jewellery brand Pipa Bella to capture the growing market for contemporary fashion jewellery in the country.

In April this year, the startup further expanded its consumer brands portfolio through investments in Earth Rhythm, Kica, and Nudge Wellness.

In FY22, Nykaa also launched new businesses such as online B2B platform ‘SuperStore by Nykaa’. Talking about SuperStore by Nykaa, Nayar said that the business presents a significant opportunity through a large addressable market.

“The early results in the business have been encouraging and we are building this business in a sustainable manner,” she added.

Recently, Nykaa Fashion announced its foray into the new category of men’s innerwear and athleisure products with the brand GLOOT.

In a research note, brokerage JM Financial said last week that Nykaa’s penetration into new geographies and foray into new segments would be the key drivers of the growth in Q1 FY23, while inflationary pressure will keep consumer sentiment dampened.

Shares of Nykaa closed 0.56% lower at INR 1,401.4 on the BSE on Monday.