Why Nykaa’s fashion biz is a blemish for growth

Expiry of the one-year lock-in period for pre-initial public offering investors has been an overhang for stocks of new-age companies. “Despite the fashion business being at an early stage, low single-digit quarter-on-quarter growth is a disappointment even while it reflects management focus on measured growth rather than adopting an aggressive stance of chasing growth at any cost,” said analysts at Jefferies India in a report dated 2 November. “We find BPC growth to be highly impressive, especially in light of the increased competitive intensity from Amazon and Myntra, who are both allocating the increased real estate to BPC on their platforms and in marketing communications,” said analysts at JM Financial Institutional Securities in a report on 2 November. We significantly lower our forecasts in fashion to factor in the flat performance in unique visitors and just 0.1 million incremental transacting users,” said JM Financial analysts. “We continue to see Nykaa dominating its focus on BPC vertical and expect significant value coming from BPC in an implied sum-of-the-parts valuation,” the analysts said.