Nykaa’s Stock Valued At Just Rs. 115 By Research Firm Macquarie, 70% Below Its Listing Valuation

Macquarie has been prophetic in its analysis of Paytm’s stock — as repeatedly predicted by the research firm, Paytm had ended up trading at 75% below its IPO price nearly a year after being listed. Macquarie has now come out with a similarly bearish report on Nykaa.

Macquarie has initiated coverage on Nykaa, and valued the stock at just Rs. 115. This is 23% below its current market price of Rs. 149, and 70% below the adjusted price of Rs. 393 at which it had listed on the stock markets during its IPO.

Nykaa’s shares has been in a steady downtrend since its IPO in November 2021. The stock had listed at twice its IPO price, and even rose in the first few weeks of trade. But the stock eventually slipped, and fell consistently over the next year. The stock touched a low of Rs. 125 in January 2023 before recovering to today’s trade at Rs. 149 per share.

Macquarie said Nykaa faces risk to its beauty segment margin as growth moves to smaller towns and offline channels, and competition in the field increases. “With larger D2C brands increasingly looking to move offline and customers demanding more physical stores to experience products, we believe Nykaa would need to reinvest leverage gains to sustain growth,” its note said. The brokerage also said that problems for Nykaa may also exacerbate by the entry of new players like Reliance Retail and Tata Cliq. Reliance is already testing out its Nykaa-rival Tira, and the Tata Group has launced its own beauty platform in Tata Cliq Palette.

“We remain concerned about Nykaa’s ability to profitably grow in the fashion segment where the company offers a curated marketplace of third-party / newly developed own apparel brands,” the brokerage note said. “An analysis of offline retailers indicates that players using a curation-led approach with third party brands have seen limited success,” it added.

Nykaa has also courted controversy with the disbursal of its bonus shares. Nykaa had timed the date of the announcement of its bonus issue right when the one-year lock-in period for the stock ended, which prevented investors from selling their shares as soon as they were able able to. This move was seen by some observes as a clever corporate machination that prevented a fall in in its stock price. The ploy, however, didn’t quite work, and Nykaa’s stock has fallen steadily since.

And Macquarire now valuating the stock at 23% below its current price could ring alarm bells for Nykaa. Macquarie has been uncannily accurate with its Paytm reports — at its IPO, it declared that Paytm’s shares were only worth Rs. 1,400, and the share price dutifully followed, falling from Rs. 2,100 to Rs. 1,400 in a matter of days. Over the last year, Macquarie had predicted Paytm’s shares were worth Rs. 900, Rs. 700 and Rs. 450, and Paytm’s shares tumbled each time. Macquaire has now come out with a similarly bearish report on Nykaa, and could signal further downside for the once-high-flying beauty stock.