Nykaa net profits down for FY 2022, inventory expenses balloon

Mumbai-headquartered FSN E-Commerce Ventures, parent entity of beauty and fashion platform Nykaa, announced its consolidated annual results for FY 2022 on Friday with a 33 percent decline in net profit after tax.

In a presentation, the company said it faced macro-challenges due to reduced discretionary spending by customers, rising inflation, and COVID-19. 

The annual GMV (Gross Merchandise Value) grew by 71 percent for the financial year to Rs 6,933 crore. Beauty and personal care continued to be a major contributor to the GMV at 72.1 percent, followed by fashion at 25.3 percent. (GMV is the total value of goods sold by an ecommerce platform in a given time frame.)

The company recorded Rs 3,774 crore of revenue from operations, a 55 percent rise year on year. However, its quarter-on-quarter revenue from operations showed a marginal decline of 11 percent for the final quarter of FY 2022.

On the other hand, EBITDA grew by 4 percent year-on-year to Rs 163.3 core for FY 2022.  

Ballooning inventory of finished goods and stock-in-trade added to beauty retailer Nykaa’s total expenses for FY 2022, which grew by nearly 57 percent. The inventory and stock-in-trade losses alone grew by nearly 8.8 times year on year. 

“We acquired over six million new customers across beauty and fashion, and witnessed superior customer retention, with improved metrics across the funnel—from visits to conversions,” said Falguni Nayar, Executive Chairperson, MD and CEO of Nykaa in a statement.

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Nykaa’s shares listed on November 10, 2021, at Rs 2,001 on BSE with a 78 percent premium, and Rs 2,018 on NSE with a premium of 79 percent respectively.

The company reported that it had utilised Rs 234.82 crore of the net IPO proceeds of Rs 600.95 crore by March 31, 2022, for pre-payment and repayment of borrowings. It also utilised around Rs 37 crore for customer acquisition and retention till March 31, 2022. 

Falguni added, “Our consumer brands have recently seen expansion into wellness, activewear, and personal care through purpose-driven brand acquisitions.”

The company also informed the exchanges that the promoter shareholders of Dot & Key had also offered to sell the remaining 49 percent shares in the company to Nykaa.

Nykaa had first acquired a 51 percent stake in the company for Rs 96.9 crore in September 2021.  For the ongoing financial year, FY 2023, Nykaa has already announced the acquisition of a 60 percent stake in nutraceutical company Nudge Wellness for Rs 3.6 crore, 18.51 percent stake in Earth Rhythm for Rs 41.65 crore, and 100 percent stake in athleisure brand KICA for Rs 4.51 crore.

In a statement, Nykaa said that it had added 32 new physical stores across the country, taking the total count to 105 stores across 49 cities as of March 31, 2022.

Nykaa's shares closed at Rs 1351.80 apiece at the end of Friday's trade, down from Rs 1364.45 during the previous day's trade.