Nykaa To Invest INR 150 Cr In Fashion Vertical Via Rights Issue For Repayment Of Loan

Beauty and fashion ecommerce major Nykaa is investing an additional INR 150 Cr into Nykaa Fashion Ltd, a wholly owned subsidiary which operates the company’s fashion vertical, via rights issue for repayment of loans given by the parent to the subsidiary.

In an exchange filing, the Falguni Nayar-led company said it would be infusing up to INR 150 Cr in Nykaa Fashion by acquiring 15 Cr equity shares of the latter on a rights basis. 

Nykaa said this is a strategic investment for providing long-term funds to Nykaa Fashion.

“The Nykaa parent will invest INR 150 Cr through a rights issue in Nykaa Fashion, which will use the proceeds to repay an existing debt extended by the parent firm, effectively making this a debt-to-equity conversion,” Nykaa clarified after this story was published.  

Besides the investment in Nykaa Fashion, Nykaa also announced other group business restructuring initiatives. The company said it would be acquiring the lingerie and athleisure business from Nykaa Fashion for INR 229 Cr.

Nykaa also announced the demerger of its B2B platform ‘Superstore by Nykaa’ from a wholly owned subsidiary FSN Distribution Limited to another such subsidiary Nykaa E-Retail Ltd.

The announcements came on the day Nykaa reported its financial results for the quarter ended December 2023. Its consolidated net profit more than doubled to INR 17.4 Cr inQ3 FY24 from INR 8.5 Cr in the year-ago quarter.

Operating revenue grew 22% to INR 1,788.8 Cr in the reported quarter from INR 1,462.8 Cr posted in Q3 FY23.

The fashion vertical saw a 40% growth in its gross merchandise value (GMV) to INR 1,012.5 Cr during the quarter from INR 724.4 Cr in the year-ago quarter. Its operating revenue grew 22% to INR 1,788.8 Cr  from INR 1,462.8 Cr in the corresponding quarter a year ago.

“Our fashion business is showing consistent improvement in profitability, reflecting our platform strength and quality of our customers,” Nykaa said. 

In the highly competitive fashion ecommerce market, Nykka competes with the likes of Myntra, Reliance’s Ajio, and Tata CliQ. 

The fashion vertical of Nykaa has made steady gains over the last two quarters after the slowdown in the previous quarters.

Shares of Nykaa ended Tuesday’s trading session 0.59% lower at INR 160.50 on the BSE.

Note: The headline and the story has been edited as the company clarified that the investment is essentially a debt-to-equity conversion.