Nykaa - The Make Up Company

Retail is ever expending business hence you will have large non cash items in balance sheet which is a good sign for turnover growth. E commerce is a most fragile business when it comes to beauty products which is seen in Naayka’s stock price and will be visible in upcoming poor results. What is point if opening offline stores when you siphoned off retailers money claiming only online retailer.

Yes it is interesting to note the share holding pattern presently…
FII and DII have added in last quarter and only the retailer were sellers, promoters have not sold much
There was a time in the Indian market when the FII played with the retailers…
Is the same game now being played by DII and FII both?
Eagerly awaiting this quarters numbers to throw light on growth story still intact or not…
(shareholders data taken from ticker tape app)


In continuation, Guys my apologies if someone feel offended as a valuepickr member I am trying to put my observations on this thread so that everyone invested here can have a relook in their conviction, our ultimate aim to protect capital and find right value of stock.

  1. Naayka has capital base of 287 cr shares now which i feel is increased to provide liquidity in stock for easy PE exit.
  2. Margins have dropped to 4% from 13% in Covid era as offline plus online mode started now which will continue
  3. I saw offline stores in Noida, Gzb, Delhi
  4. Customer response is not enthusiastic, even sugar doing better right now
  5. Intense competitive market where MAC, Sugar, Shoppers stop, Sephora, and upcoming reliance will eat up margin or growth will be difficult.
  6. Current market cap of 38000 cr with EV/EBIDTA ratio of 190 is unsustainable.
  7. Any poor results ( growth less than 35% atleast) will invite strong distribution

Fair market cap with current margins is no where justified more than 8000 cr which means stock may loose market cap by 75%.

Sorry to be blunt however please keep a close watch.


The debate around Nykaa can be broken up into two parts:

  1. the business and its management
  2. the stock valuations

For its business, in my opinion, it is one which has very high competitive dynamics. There are boutique brands and regional brands along with pan-India and international brands in this space. Also, in my limited research, I have found that women tend to experiment with products from different brands.

With the bonus fiasco and aggressive IPO pricing, the management has given out a slightly negative perception to the retail investor community.

December is usually a very good quarter for them and we need to await the results for this quarter to see how well it has done.

On the valuation front, it is way too expensive and given the mediocre business characteristics there will likely come a time when the stock will be in a sideways consolidation for years or fall considerably till it comes to a peer-comparable valuation.

What people often forget is that PE players pay a premium for scarcity. In public markets that is not there. A company needs to show profits, longevity of growth and sustainability of business dynamics to be able to command even 2-standard deviation (+ve) valuations.

If one is investing their own money, it is best not to get enamoured by media hype and narratives (sometimes paid for as surrogate ads) and stick to basic common sense business and valuation principles.