Nykaa Stock: Foreign Institutional Investors Express Concern in Q2, yet Domestic Investors Remain Resilient

Following a significant decline in the stock price, foreign investors have sold off their stake in online beauty retailer Nykaa in the June quarter.

Foreign portfolio investors reduced their stake to 9.93% as of June, compared to the 12.17% held in the company as of March.

According to the latest shareholding data available with the exchanges, institutional investor Government Pension Fund Global has marginally reduced its stake to 1.13% during the June quarter, from 1.15% in the previous quarter.

Meanwhile, another foreign investor Canada Pension Plan Investment Board has slightly increased its stake by 0.01% to 1.47%.

Domestic fund houses, on the other hand, have continued to have faith in the company, increasing their stake to 8.5% as of the June quarter. Mutual funds held about 5.14% in the company at the end of the March quarter.

The company is primarily owned by promoters, with a stake of 52.28%, while public shareholders hold the remaining 47.72%. Among public shareholders, ICICI Pru Life has increased its stake from 2.34% to 2.63% in the first quarter of the current fiscal.

Despite its underperformance this year, retail investors have held onto their shares in the company, with their combined shareholding (individuals with capital of up to Rs 2 lakh and those with excess of Rs 2 lakh) rising to 11.63%. Nykaa recently lost its large cap status and was downgraded to the mid cap category after performing poorly in the market.

Compared to other internet tech companies, where Paytm and Policybazaar shares have risen by about 60% each this year, and Zomato which is up by 37%, Nykaa is down 6% year-to-date.

The stock is trading nearly 70% below its 52-week high.

Analysts believe that intense competition in the industry is affecting Nykaa’s growth potential. Weak earnings and top management departures in recent quarters have also not helped the company’s case.

In the March quarter, Nykaa reported a 72% decrease in profit to Rs 2.4 crore, while consolidated revenue rose by 34% to Rs 1,301 crore in the same period.

Kotak Institutional Equities, however, remains optimistic about the stock and has a ‘buy’ recommendation with a price target of Rs 210.

The brokerage firm stated that the BPC business of the company is growing healthily, and the beauty sector is likely to grow faster than the personal care category.

“The fashion business will focus more on private labels, and customer loyalty will eventually reduce marketing costs,” the brokerage firm said.

(Disclaimer: Recommendations, suggestions, views, and opinions provided by the experts are their own and do not represent the views of Economic Times).


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