In its research report dated September 30, 2023, HDFC Securities has recommended a “reduce” rating on FSN E-commerce Ventures, with a target price of Rs 130.
The research report includes insights from a recent interaction with the Nykaa team, highlighting key takeaways. Nykaa continues to maintain a run rate of 4-5 million customer additions annually in the Beauty, Personal Care (BPC) segment, building on a cumulative customer base of 18 million. However, the report notes a dip in advertising income as a percentage of revenue, which is attributed to initial challenges with the new advertising technology stack. Recovery from this dip is expected to be around a quarter away.
In terms of Nykaa’s fashion business, it experienced a soft performance in Q1 with a growth rate of 12% year-on-year, which is considered an anomaly, as the trend has been one of upward growth. The report also indicates that the fashion business has passed its peak investment phase. However, there are concerns that the cash generated by the BPC segment may only be sufficient to fund growth in the fashion and B2B segments in FY24. This could imply a more cautious approach to growth in units that are currently operating at a loss. It’s worth noting that Nykaa Fashion’s debt has already tripled in FY23 to INR 4.2 billion.
HDFC Securities maintains its “REDUCE” rating on FSN E-commerce Ventures with a Target Price (TP) of INR 130, which implies a price-to-earnings (P/E) ratio of 162x for September 2025. The estimates in the report remain unchanged.
Investors contemplating their investment decisions regarding FSN E-commerce Ventures may find HDFC Securities’ recommendation and target price to be valuable considerations.