Indian beauty firm Nykaa loses sheen as costs surge

BENGALURU, Feb 9 (Reuters) – Indian cosmetics-to-fashion retailer Nykaa on Wednesday reported a 59.5% slump in quarterly net profit on a steep increase in expenses, overshadowing a rise in revenue and gross merchandise value.

Total costs surged 46.8% year-on-year to 10.67 billion rupees ($142.68 million) in the third quarter, including a big jump in employee benefit expenses, Nykaa’s parent company FSN E-Commerce Ventures Ltd (FSNE.NS) said in a regulatory filing.

Marketing and advertisement spending more than doubled to 1.54 billion rupees, FSN said in its investor presentation.

A similar jump in costs had led the company to post a 96% slump in quarterly profit in its first post-IPO earnings report in November. read more

Founded in 2012 by former investment banker Falguni Nayar, the company became popular by selling cosmetics and grooming products from domestic as well as international brands before foraying into fashion and other products such as pet care and household supplies.

Quarterly gross merchandise value (GMV), or the monetary value of orders across the company’s platforms, climbed 49% to 20.44 billion rupees, while total orders jumped to 9 million from 6.5 million, as a restart to weddings, functions and parties fuelled demand for Nykaa’s products.

Nykaa’s mainstay beauty and personal care products business contributed 75% to the GMV, while the fashion segment’s share was 25%.

However, consolidated net profit fell to 279.3 million rupees in the three months ended Dec. 31, from 689.7 million rupees a year earlier.

Revenue from operations rose to 10.98 billion rupees from 8.08 billion rupees.

The company’s shares have lost about 16% since the blockbuster debut in November, compared with a 3.1% fall in the blue-chip NSE Nifty index (.NSEI) during the period.

($1 = 74.7810 Indian rupees)

Reporting by Anuron Kumar Mitra in Bengaluru; Editing by Sriraj Kalluvila

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