Nykaa gets a margin makeover, but risks remain

Shares of FSN E-Commerce Ventures (Nykaa) hit a new 52-high of ₹363.40 on Thursday. Although the festive season has shifted to the December quarter (Q3FY27), Nykaa investors are already cheering as the September quarter (Q2FY27) results signal improving profitability.

Revenue rose 28% to ₹3,006 crore year-on-year, while net profit tripled to ₹101 crore. Gross merchandise value (GMV) grew 30% to ₹6,151 crore, driven by beauty and personal care (BPC) GMV of ₹4,454 crore, up 25% year-on-year. The improvement was buoyed by a 26% increase in annual unique transacting customers and an increase in store count from 265 to 338 in a year. Fashion drove growth, with GMV increasing 42% to ₹1,674 crore. Higher traction in BPC and fashion caused the Ebitda margin to expand at a multi-quarter high of 8.7%, from 6.8% in Q2FY26.

BPC margin expanded from 9% to 10.5%, and fashion sustained positive Ebitda for the third straight quarter, against a 3.5% loss in Q2FY26. Operating leverage, marketing efficiencies, and the ramp-up of House of Nykaa have supported BPC profitability.

GMVs of the company’s own brands, including Dot & Key and Kay Beauty, have grown 39% year-on-year, and now account for 12% of BPC GMV. Emerging brands such as Nykaa Wanderlust, Earth Rhythm, and the recently acquired Simply Nam could help it keep up with its ₹4,000-crore annualized GMV run rate.

Meanwhile, fashion reported reduced marketing and overhead expenses, aided by key partnerships with H&M and Nike alongside a broader catalog that added 250 brands in Q2FY27. Customer acquisition surged 31% year-on-year, even as acquisition costs dropped by 30%.

Management is gunning for a high-single-digit Ebitda margin in fashion by FY30, expecting it to stabilise above 10% through operating leverage, higher marketing monetisation and improved customer acquisition efficiency. However, any margin expansion is likely to be gradual as the company scales investments and builds customer loyalty.

Intensifying competition poses a key risk, with rivals boasting either deeper pockets or more customers. In addition, its B2B distribution arm, Superstore could drag down margins if its growth comes at the cost of the core business. Superstore reported 28% net sales value growth in Q2FY27.

Nykaa stock has rallied 31% so far this calendar year, taking its EV/Ebitda multiple to 61 based on FY28 consensus Bloomberg estimates. “Valuations remain punchy, but are underpinned by strong growth expectations,” said Jefferies India.

Ananya Roy is the Founder of Credibull Capital, a SEBI-registered investment adviser, where she focuses on building disciplined, research-driven investment strategies for long-term wealth creation. A CFA charterholder with an MBA in Finance from a premier IIM and an engineering degree from NIT, she combines strong academic grounding with nearly 15 years of hands-on experience across the investment management spectrum.<br><br>Her career spans index construction, portfolio management, and private equity investing, giving her a 360-degree perspective on capital markets. Prior to founding Credibull Capital, she held key roles at Edelweiss, Reliance PMS, and Morningstar, where she was involved in fund management, equity research, and product development. This diverse exposure enables her to seamlessly connect macroeconomic trends with bottom-up stock selection.<br><br>Ananya is known for her ability to simplify complex financial concepts and translate them into actionable insights for investors. She writes extensively on the economy, market trends, regulatory developments, and personal finance, with her work also featured in leading publications such as Moneycontrol, The Economic Times, and Financial Express.<br><br>Deeply passionate about investing, she enjoys immersing herself in detailed industry analysis and company fundamentals, constantly seeking to uncover high-conviction opportunities. Her investment philosophy is rooted in patience, discipline, and a sharp focus on risk-adjusted returns.

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