Nykaa’s Profit Sharply Falls By 96% Due To This Reason; Revenues Increase

By Malvika Gurung Last updated Nov 15, 2021

The fall in profit is majorly caused by the company’s increased expenses on marketing and advertising

The FSN E-Commerce Ventures owned beauty and fashion platform Nykaa was listed on the Indian exchanges last week, its IPO valued at Rs 5,352-crore and subscribed 81.78 times between October 28 and November 1.

Additionally, the IPO received a total of 216.59 crore equity shares as bids, against the offer size of 2.64 crore equity shares.

On Sunday, the e-tailer reported its earnings results for the September-ending quarter. While the beauty and fashion company’s consolidated revenue from operations increased to Rs 885.3 crore by 47% YoY, its consolidated net profit, profit after tax declined by 96% YoY to Rs 1.2 crore for the three-month period.

Nykaa’s Q2 Performance

Nykaa’s parent company FSN E-Commerce Ventures reported a net profit of Rs 1.2 crore for the September ending quarter, compared to Rs 27 crore in the same period last year. This marks a declining PAT of 96% for the company, on a YoY basis.

The fall in profit is majorly caused by the company’s increased expenses on marketing and advertising in the focused quarter. These expenses grew 286% to 121 crore in the September quarter, which was recorded at Rs 31.5 crore in Q2 FY21.

“Increased marketing spends has led to acceleration of customer acquisition, also evident in the unique visitor and transacting customer metrics. The company continues to invest in expansion of retail stores and fulfilment capacity ahead of the festival season,” adds Nykaa’s founder and CEO Falguni Nayar.

However, the company’s revenues from operations grew 47% YoY to Rs 885.3 crore. Additionally, its gross profit margin showed an improved by 345 basis points to 42.7% in the September quarter, compared to 39.3% in the same period last year.

The company’s EBITDA came at Rs 28.8 crore, declining 48% YoY, while the EBITDA margin reduced 5.8% or 585 bps for the period.

The company’s fashion business has boosted its revenues, as it grew by 295% YoY to Rs 11.5 crore, and its beauty business grew 29% YoY to Rs 22 crore.

”We have maintained growth momentum in our beauty business, accelerated our fashion business and focused on building the brand Nykaa with strong marketing campaigns both digitally and mass media,” added Nayar.