Fsn E-Commerce Ventures: Priced for Perfection; Maintain Sell

Nykaa’s FY26 customer acquisition drive, especially in BPC (priced-in), is certainly encouraging. However, we suspect that in the medium term, the ask from BPC growth remains high. In 9MFY26 (HSIE estimates), if one strips out own brands’ sales and eB2B, core BPC is estimated to have grown at sub-20%. One may argue why strip out own brand sales? The reasons are two-fold: (1) Only one private label (Dot & Key; annualized run-rate: INR19bn) is estimated to account for >60% of private labels’ GMV. How much can one brand scale? The odds are there might be a natural cap here; (2) Reliance on other channel sales is on the rise for its own brands (BPC), which is not exactly a confidence booster for own platform health. Note: While own brands (BPC) grew ~69% YoY in 9MFY26; own channel sales grew 47%. On BPC margins, we suspect a lion’s share of the 80bps BPC margin is courtesy (1) higher own brands salience and (2) improving eB2B margins (~500bps in 9MFY26). We suspect core BPC platform margins do not offer leverage benefits, given the imperative to invest more in rapid fulfillment options. Fashion losses continue to ebb; however, from here on, most of the heavy-lifting would have to be done by cutting the customer acquisition purse; which may in turn have growth implications. We maintain our FY27/28 EBITDA estimates and our SELL rating with a TP of INR205/sh (implying 58x FY28 pre-IND AS EV/EBITDA).

Healthy own brand (BPC) sales backstopping BPC moderation, in our view: In 9MFY26 (HSIE estimates), if one strips out own brand sales and eB2B, core BPC is estimated to have grown at sub-20%. One may argue why strip out own brand sales? The reasons are two-fold: (1) Only one private label (Dot & Key; ann. run-rate: INR19bn) is estimated to account for >60% of private labels’ GMV. How much can one brand scale? Odds are there might be a natural cap here; (2) Reliance on other channel sales is on the rise for its own brands (BPC) – not exactly a confidence booster for own platform health. Note: While own brands grew ~69% YoY in 9MFY26; own channel sales grew 47%. We suspect that core BPC margins do not offer operating levers as (1) ad income (as % of NSV) naturally drops with increase in own brand salience and (2) rise in investments in rapid fulfillment options.

Getting to EBITDA break-even in Fashion from here may have growth implications: In 9MFY26, Nykaa Fashion has done a commendable job of balancing growth (+24%) and cutting back its burn (EBITDAM improved from -7.7% to -3.7%). However, most of these gains have come from cutting back on (1) marketing spends and (2) employee/other expenses (below CM-level expenses). Interestingly, the stickier fulfilment costs continue to rise (as % of NSV and per order). Given that there is only so much one can do below the CM level, we suspect getting to positive unit economics from here may have to be done cutting down on customer acquisition spends, which could in turn have growth implications.

Valuation and outlook: Nykaa remains an efficient online business, especially for BPC. Fashion remains a WIP. Valuations at ~66x EV/EBITDA remain heady. We maintain our FY27/28 EBITDA estimates and our SELL rating with a DCF-based TP of INR205/sh (implying 58x FY28 pre-IND AS EV/EBITDA).

Source: HSIE Institutional Report March 17 2026