Brokerage firm ICICI Securities predicts growth in beauty and fashion retailer Nykaa's revenue as it sees competition in the online Beauty and Personal care (BPC) segment weakening further.

The Nykaa Analyst: ICICI Securities analysts led by Manoj Menon upgraded their rating for the omnichannel retailer from “hold” to “add” but brought the target price down from ₹175 to ₹145.

The Nykaa Thesis: In its latest report, the brokerage firm says that while it always liked Nykaa's business model, it remained wary because of the soaring valuation after the company went public.

Now that the company has seen an approximate 70% correction from its peak valuation, ICICI Securities suggests picking up shares in the Falguni Nayar-led startup.

Nykaa, which reported a 39% YoY increase in revenue in the second quarter of financial year 2023 has been seeing growing interest from institutional investors, FIIs and mutual funds, who have all increased their stake in the company since the numbers came out. The company is also expected to post good numbers for the December quarter, as analyst firms Kotak Institutional Equities and JM Financial expect the festive season to have driven up sales.

The brokerage firm predicts that while the e-commerce company may face difficulties growing the fashion arm of the business due to higher competition, its successful presence in the BPC segment will continue as the competition remains weak. The firm also warns that the company may hamper its gross margins if it chases growth at elevated levels.

Price Action: Nykaa had a tough day at the bourses as it fell over 5% to record a new 52-week low of ₹120.70. It managed to bounce back a little in the late hours of trading to close at ₹124.75.