Beauty Ecommerce Platform Nykaa’s Shares Plummet to Record Low of INR 115

• ByStartupStory     |    April 26, 2023

Nykaa, the beauty ecommerce platform, witnessed a record low of INR 115.5 during intraday trading on the BSE on April 25. This happened just a day after the company brought on board 50 senior executives for top positions, including CTO and CFO. It is worth noting that the drop in share prices is not a recent phenomenon, as the Nykaa stock has seen a decline of nearly 7% over the past five trading sessions, falling from INR 125.5 on April 18.

Nykaa’s shares have taken a nosedive, dropping from an adjusted listing price of INR 400 to INR 115.5, erasing more than 71% of investor wealth. Interestingly, the startup’s financial health appears to mirror this decline. Despite reporting a profit of INR 29 Cr in the December 2021 quarter, Nykaa’s profits fell 68% YoY to INR 9 Cr in the same quarter last year. Between 2021 and 2022, the startup’s profits fell by 69%, mirroring the decline in its stock price. The primary drivers behind the decline in Nykaa’s share prices are macroeconomic uncertainties, concerns about a recession, and the Russia-Ukraine conflict. Additionally, the expiration of the lock-in period in late 2021 saw several marquee investors divest their holdings, adding to the company’s troubles.

Nykaa attempted to mitigate the damage caused by its declining stock prices by offering bonus shares to investors in November 2022, but this move failed to halt the selloff in the capital markets. Additionally, the startup faced further setbacks when a number of senior executives departed earlier this year, leading to concerns about its corporate governance and lack of experienced leadership.

Nykaa faced its biggest challenge yet when Reliance, a deep-pocketed conglomerate, entered the beauty space with its omnichannel platform, Tira, earlier this month. This move, coupled with other setbacks, prompted brokerage firm Macquarie to cut Nykaa’s target price to INR 115 last month, warning that competition from industry giants could compound the listed startup’s troubles. In the quarter ending December 2022, Nykaa’s profits declined by 70% YoY to INR 8.5 Cr, despite a 33.2% YoY increase in operating revenue to INR 1,462.8 Cr during the same period. As of Tuesday, Nykaa’s shares closed at INR 116.9 on the BSE.

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