The share price of FSN E-Commerce Ventures, better known as Nykaa, is in focus. The brokerage house Motilal Oswal has initiated coverage on the stock with a Neutral rating. The brokerage has set a target price of Rs 280. This implies an upside potential of about 11% from current market levels.
Let’s take a look at the 5 key reasons why the brokerage house has kept a Neutral stance on Nykaa –
Motilal Oswal on Nykaa: Riding India’s shift from offline to online retail
Motilal Oswal believes Nykaa is well placed to benefit from the ongoing shift in India’s retail market. As per the brokerage report, “We see Nykaa as a beneficiary of India’s shift from offline to online retail and from unorganized to organized formats, particularly in the BPC segment.” Beauty and Personal Care, which forms the bulk of Nykaa’s business, continues to see increasing online adoption, especially among urban and affluent consumers.
The brokerage added that with a strong position in online beauty retail, Nykaa can scale as the category matures. However, it also flags that this structural trend is widely known and already factored into market expectations.
Motilal Oswal on Nykaa: Growth outlook looks steady
Motilal Oswal has projected healthy growth numbers for Nykaa over the coming years. According to the brokerage report, “We estimate Nykaa to deliver a CAGR of 26% in BPC gross merchandise value over FY25–30E.”
At the same time, the report noted that while growth remains intact, it is not aggressive enough to justify a significantly higher valuation from current levels.
Motilal Oswal on Nykaa: Profitability improvement, but valuations cap upside
On the profitability front, Motilal Oswal expects margins to improve gradually. As per the brokerage report, “BPC EBITDA is estimated to clock a CAGR of 35% over FY25–30E, supported by operating leverage and increasing contribution from owned brands under House of Nykaa.”
Despite this, the brokerage cautioned that strong share price performance over the past year limits near-term upside. It pointed out that growth and margin improvement may not be enough to drive a sharp re-rating in the stock.
Motilal Oswal on Nykaa: Valuation and the neutral call
Motilal Oswal has valued Nykaa using a Sum-of-the-Parts approach, where different businesses are valued separately. According to the brokerage report, “For the BPC business, we ascribe a 50x EV/EBITDA multiple…implying a per-share value of Rs 255.”
For the fashion business, the brokerage has applied a discounted cash flow method. It noted, “For the fashion business, we use the DCF approach, implying a per-share value of Rs 31.” After adjusting for net debt, this leads to a target price of Rs 280.
Motilal Oswal on Nykaa: Fashion business still a work in progress
While Nykaa’s fashion segment shows promise, Motilal Oswal remains cautious. As per the brokerage report, “The Fashion segment is expected to achieve EBITDA breakeven by end-FY26.” Until then, margins are likely to remain thin, with gradual improvement over the long term.
The brokerage also highlighted that the marketplace-led model reduces inventory risk and working capital pressure. Still, the fashion business is not yet a strong profit driver, which limits the overall upside for the stock.
Motilal Oswal on Nykaa: Balanced risk-reward
Motilal Oswal added that while Nykaa benefits from long-term trends such as digital adoption and premiumisation, current valuations leave limited room for surprise.
According to the brokerage report, “Following the strong share price performance over the past year, the risk-reward appears balanced, limiting near-term upside.”