Nykaa gains 7% after 1.4% equity change hands vial block deals

According to reports, Harindarpal Singh Banga, a pre-IPO investor in Nykaa, was looking to sell up to 1.4 per cent of his stake in the the company today

Nykaa block deal news: Share price of FSN E-Commerce Ventures, the operator of beauty and personal care (BPC) brand Nykaa, gained 7.46 per cent to Rs 226.10 on the BSE in Friday's intraday trade after 1.4 per cent equity of the company changed hands via block deals.

Till 09:20 AM, around 41.23 million equity shares, representing 1.45 per cent of total equity of Nykaa, had changed hands on the BSE, exchange data shows. The names of the buyers and sellers, however, were not ascertained immediately.

That said, Harindarpal Singh Banga, a pre-IPO investor in Nykaa, was looking to sell up to 1.4 per cent of his stake in the company at a floor price of Rs 198 per share, reports said on Thursday. Singh held a 6.4 per cent stake in Nykaa at the end of the June quarter.

On Wednesday, August 21, 2024, the stock of Nykaa had hit a two-year high of Rs 228.5, surging 18.6 per cent in the intraday trade, driven by heavy volumes. The stock had hit its highest level since October 3, 2022, and recorded its sharpest intraday rally since November 11, 2022. 

The stock had previously hit a record high of Rs 429 on November 26, 2021.

FSN E-Commerce Ventures is a consumer technology platform provider that distributes beauty, fitness, healthcare, skincare, and haircare products via online portals and physical stores. It has three operating segments: Beauty and personal care (BPC); Fashion; and Others, which include Nykaa Man, Superstore and international business.

The company expects significant growth in the BPC and fashion segments, supported by its ongoing cost optimisation and scale efficiency efforts. The expansion of retail space, brand partnerships and synergies from mergers should further enhance Nykaa's profitability.

Last week, Nykaa reported a 152 per cent year-on-year (Y-o-Y) jump in net profit to Rs 13.6 crore for the quarter ended June 30, 2024, compared to Rs 5.4 crore in the same period last year. The company’s operating revenue for the quarter was Rs 1,746 crore, up 23 per cent from Rs 1,422 crore in the corresponding quarter of the previous year.

Management is confident of accelerating growth going forward, aided by the festival season. This suggests that revenue growth momentum for the consolidated BPC business (including e-business-to-business/eB2B) may sustain at around 30-32 per cent Y-o-Y in the near to medium term.

While the recent demand environment has not been favourable, analysts at JM Financial Institutional Securities view Nykaa as the dominant player in a segment with strong secular tailwinds and expect sustained compounding returns.

Although the brokerage firm has raised profitability estimates in the omnichannel BPC and fashion segments, it has factored in higher losses in eB2B and international operations, with cumulative losses of ~61.5 crore projected for 2024-25 through 2027-28, before turning earnings before interest, tax, depreciation, and amortisation (Ebitda)-positive in 2028-29.

“Rolling forward to September 2025, we maintain our target price at Rs 230 and reiterate our ‘buy’ rating, expecting the company to deliver robust numbers during this year’s festive period,” analysts said in a results update.