Nykaa, a beauty and fashion ecommerce company has been pulled down by Kotak Institutional Equities in this quarter as the company faces issues related to the increase in fulfilment cost and competition from the players in the quick commerce space. The brokerage has reduced the fair value by INR 5 to INR 190 and cut its EBITDA estimates for the next three fiscal year.
The possibility to enhance the frequency of deliveries up to one or two days in 63 cities may affect the company’s margins. Nevertheless, the broader assortment, content as a marketing strategy, and personalization can assist the company to mitigate the competition from the quick commerce platforms According to Kotak, the expansion of assortment and the availability of more cities can bring threats.
However, Kotak has not lost its optimism on Nykaa’s long-term growth even though the rating has been brought down. The brokerage also notes that the firm’s Peer-to-Peer discovery-based BPC, a hefty SKU and strong loyalty programme, would still be a points of competitive advantage.
Nykaa Downgraded by Kotak: Will Quick Commerce Threaten its Growth?
