Nykaa faces FII wrath in June quarter, but domestic investors hold firm

Foreign portfolio investors cut down their stake to 9.93% as of June, compared with 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 reduced stake marginally to 1.13% during the June quarter, from 1.15% in the prior quarter.

Meanwhile, another foreign investor Canada Pension Plan Investment Board has upped its stake by a marginal 0.01% to 1.47%.

Domestic fund houses, however, continued to show faith in the company, hiking their stake to 8.5% as of June quarter. MFs held about 5.14% in the company at the end of the March quarter.

The company is majorly promoter-owned — with 52.28% — while public shareholders have the remaining 47.72%. Among public shareholders, ICICI Pru Life has raised the stake from 2.34% to 2.63% in the first quarter of the current fiscal.

Despite the underperformance this year, retail investors stayed put in the company as their combined shareholding (individuals with capital of up to Rs 2 lakh and those with excess of Rs 2 lakh) rose to 11.63%.Nykaa has recently lost its large cap status and was downgraded to the mid cap category after a muted show on the Street.

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

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

Analysts say the stiff competition in the industry is hurting Nykaa’s growth prospects. Muted earnings and top management exits in the past few quarters haven’t helped the company’s case either.

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

Kotak Institutional Equities, however, is bullish on the stock and has a ‘buy’ tag at a price target of Rs 210.

It said the BPC business of the company remains on a healthy growth trajectory while beauty will likely grow faster than the personal care category.

“Fashion business will sharpen its focus on private labels and customer stickiness will eventually drive lower marketing costs,” the brokerage said.

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