FDI rules place restrictions on market place players bring sellers also. That’s the high level of regulation thing.
Tata, Reliance retail are potential strong competitors.
Disc: Looking to invest after consistency in results
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There is also an regulatory risk for Nykaa as well. Government is also discussing proposal for not allowing e-comm companies to use their own private labels in their platform. Nykaa private label has 10% of total revenue we need to wait and watch how it will play.
Does this mean that in Inventory based model, once Nykaa buys stuff from brands to build its inventory and sells those brands - the seller becomes Nykaa and not those brands. In case of Amazon, if say the same brand has an online storefront - then the seller is still that brand itself and not Amazon and items are shipped from those brands directly?
As per regulations you cite, Amazon cannot become a direct seller of brands (except private labels)?
Lastly on similar front (for even domestic marketplaces), the Tata super app got delayed because of another regulation of market places where a marketplace cannot sell its own brands in the market place - implying a Tata cannot sell its own branded products via its super app - are you aware of what is the recent on this regulation as it created big news few months back…Also, do private labels not come under the umbrella of an “own brand” of a marketplace?
I am not sure if Nykaa is classified as a marketplace or a D2C brand. I guess its the latter.
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https://jungleworks.com/how-nykaa-works-nykaas-business-model-how-you-can-replicate-it/
Nykaa is basically an omni channel retailer of beauty products, just like Croma, Shopper stop, Big bazaar etc.
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In light of the above discussions around valuations and seeing the general IPO mania, I posted the below link earlier. Now I don’t see it. Was this flagged? If yes then could someone please explain it to me why?
Dove itself is a cosmetic company … the campaign is against stereotyping, it has nothing to do with cosmetics usage
And why only woman , even men uses lot of cosmetics.
Aftershave , shaving cream, hair gel all r part of it.
According to Drugs& Cosmetic Act 1940 and the Rule in 1945 “Cosmetic is define as the means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance.
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I wonder why this wrong narrative caught on.
I hear the best of people say that Nykaa is not to be bought because it’s at 1600 PE and hence clearly overvalued.
It’s cost of operations is going to be high for many years, since it’s growing at a scorching pace. So, it’s not a good barometer to see it’s Net Profit. Hence, PE is not a fair measure.
If we go by Mcap/Sales
Nykaa is at 41
Dmart 12
IndiaMART 32
Infoedge 66
So, yes. Prima Facie Nykaa is expensive.
But, this is backed by strong growth in Revenues, around 40% yoy, and a high gross margin 42%. Dmart doesn’t come half way in these two aspects and is yet trading at 240PE.
Nykaa’s one year forward Mcap to Sales is a steal, closer to 20.
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Any idea for market opportunity for Nyka in beauty segment only.
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Comparison of Nykka with Zydus Is irrelevant but still i will answer this on facts
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Please check the topline and bottom line growth of Zydus between 2011- 2019 … you will get the clear idea of it’s growth trajectory
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Now in 2020 suddenly it became 1767 cr topline from 843 … These are adjusted number after it acquisition of Heinz India , nothing else …
And here Net profit is continuously dragging since last 3 year…
If We read accounting numbers seperately , error occurs.
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Hey @jamit05 ,
Its not a good idea to compare price to sales of different companies in isolation without taking their net profit margins into consideration, indiamart , iex , naukri trade at high price to sales beacuse of their net profit margins are excess of 40%, whereas for nykaa it may touch 10% at the peak.
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Nykaa IPO.xlsx (87.8 KB)
Nykaa has a total addressable market across beauty and personal care and fashion of 10 Lakh Corer in 2025
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Sometimes I get a feeling that with damani at helm and the excellent management show by dmart so far, it can be a dark horse not only in online grocery space but also in beauty & fashion…until now I used to think that only Tata and JIO can do a nykaa but now, why not a dmart…
Disc. Invested in dmart, tracking position in nykaa. No buy/sell recommendation. I can be wrong in my assessments
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Even though it’s a moking , still u r right
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A Redseer report commissioned by Nykaa for the IPO states that the company is estimated to have a market opportunity of Rs 1.9 lakh crore in the Indian Beauty and Personal Care space by 2025
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Hi
Cud you pls expand on why you say their net margin at peak will be 10%…why can’t it be 20-25%….isn’t beauty one of the highest margin pdts category?
Rgds
RR
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I tried to do a valuation analysis of Nykaa. I have assumed that Nykaa will have an exit PE of 40 after 10yrs which seems conservative. On the horizontal axis is the Net Profit Margin and on the vertical axis is the sales growth. To get a return of 15% over 10years the market cap at present is calculated in the results. This is for educational purposes only, not any advice. Any change in exit PE will drastically change the calculation.
| Market cap Calculation | ||||||
|---|---|---|---|---|---|---|
| Sales | 2441 | |||||
| Exit PE | 40 | |||||
| Expected return | 15% | |||||
| Time in yrs | 10 | |||||
| Sales Growth\NPM | 5% | 10% | 20% | 30% | 40% | 50% |
| 10% | 2493 | 4986 | 9972 | 14958 | 19944 | 24930 |
| 20% | 5951 | 11902 | 23805 | 35707 | 47609 | 59511 |
| 30% | 13250 | 26500 | 53001 | 79501 | 106001 | 132501 |
| 40% | 27801 | 55603 | 111206 | 166809 | 222412 | 278014 |
| 50% | 55424 | 110848 | 221697 | 332545 | 443394 | 554242 |
| 60% | 105679 | 211357 | 422714 | 634071 | 845428 | 1056786 |
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I don’t have strong reasons to say that NPM will peak at 10%, I just took Page Industries who has similar business model as Nykaa, page industries have npm of 12%, Dmart has around 5% , so I assumed nykaa will have around 10% npm
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Beauty is higher margin but for companies owning those brands. Nykaa is just a seller and if we think Nykaa products will command market share of its own brands against established brands ut is too ealy to tell. Walmart and Amazon snd other big retailers in USA still sell more brands that are not owned by them.
Disc: not invested, no tracking position
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PPFAS seminar on D2Cbrands.
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