Nykaa, the Indian beauty ecommerce platform, hit an all-time low of INR 115.5 on April 25 during intraday trade on the Bombay Stock Exchange. This comes just one day after the company announced the hiring of 50 senior executives for positions such as CTO and CFO. However, the company’s shares have been in decline for the past five trading sessions, falling almost 7% from INR 125.5 on April 18 to its current level.
Nykaa’s shares were listed at an adjusted price of INR 400, but have since plummeted, wiping off more than 71% of investor wealth. The dip in share prices mirrors the company’s financial health, with profits falling by 68% YoY in the quarter ending December 2021.
The primary factors responsible for the sharp decline in Nykaa’s share prices are macroeconomic uncertainties, apprehensions of a recession, and the Russia-Ukraine war. Furthermore, marquee investors have offloaded their stakes, adding to the company’s woes. Nykaa attempted to curb the selloff in capital markets by offering bonus shares in November 2022, but to no avail.
Earlier this year, a slew of senior executives left the company, raising concerns about corporate governance and leadership. Additionally, Reliance, a major player in the Indian market, entered the beauty space with its omnichannel platform, Tira, exacerbating problems for Nykaa.
In December 2022, Nykaa saw its profit shrink by 70% YoY to INR 8.5 Cr, despite a 33.2% YoY increase in operating revenue to INR 1,462.8 Cr during the same period. The brokerage firm Macquarie also slashed Nykaa’s target price to around INR 115 last month, citing the challenges faced by the company.
Overall, Nykaa’s declining financial performance and macroeconomic uncertainties have led to a significant drop in share prices, with investors losing confidence in the company’s future prospects.