Nykaa shares hitting an all-time low, know why!

Shares of Nykaa (listed as FSN E-Commerce Ventures Limited) crashed 9 per cent to hit an all-time low of Rs 1371.35 on BSE, with its market cap slipping below Rs 70,000 crore.

However, the stock saw some recovery in the afternoon session on Thursday, when at 13:30 hours, the shares were trading 3.42 per cent lower at Rs 1453.40 on BSE.

The stock of Nykaa touched an all-time high of Rs 2,574 on November 26, 2021 and then tanked over 47 per cent in February. Earlier this year the shares of all the new-age Internet companies were on a selling spree, mirroring the global trend.

“Nykaa is witnessing some lower-level buying taking cues from some recovery in the broader indices. The stock may go up to Rs 1500-1520 levels in this momentum, however, doesn't seem sustainable at higher levels. Investors may remain cautious and take this opportunity to offload their positions," Dr. Ravi Singh, Vice President and Head of Research, ShareIndia said.

The company posted a weak set of numbers for the quarter ended December 2021. FSN E-Commerce Ventures, the parent company of online beauty e-commerce platform Nykaa, reported a 58 per cent year-on-year (YoY) decline in its consolidated net profit for October-December at Rs 29 crore. Its net profit stood at Rs 1.2 crore in the preceding September quarter.

However, revenue from operations grew 36 per cent YoY and 24 per cent quarter-on-quarter (QoQ) to Rs 1,098.4 crore from Rs 808 crore in the October-December quarter of 2021.

Led by its strong business position, Nykaa is expected to trade at a scarcity premium.

"Cosmetics had suffered due to COVID-19. Those things have started coming back but we don't believe it is back to the pre-COVID-19 level of consumption," Nykaa Executive Chairperson, MD and CEO Falguni Nayar told PTI.

She said that last year, the company had put a brake on marketing expenses due to COVID-19 and, hence, this is a one-time impact that has reflected on the third quarter.

Nykaa shares got listed at a premium of 79 per cent to the issue price, marking a strong listing for the online beauty retailer. The company made its market debut at Rs 2,001 per share on the BSE against the IPO issue price of Rs 1,125.