India's Nykaa posts surge in Q2 profit on strong festive season demand

BENGALURU (Reuters) - India's FSN E-Commerce Ventures Ltd, parent of cosmetics-to-fashion retailer Nykaa, reported a more-than-three-fold surge in quarterly net profit on Tuesday, helped by strong demand heading into the festive season.

The company's shares rose about 4.5% to 1,204 rupees in afternoon trading, climbing back above its initial public offering (IPO) price of 1,125.

FSN's net profit surged to 41.08 million Indian rupees ($497,210) in the July-September quarter, from 11.7 million rupees a year ago. Revenue rose 39% to 12.31 billion rupees.

Online shopping among Indians has been on the rise, accelerated by the COVID-19 pandemic, with the country's affluent youth splurging on beauty products, apparel and footwear, helping platforms like Nykaa book solid sales gains.

Last month, Reuters reported Indian consumers were lapping up everything from cars to jewellery in the festive season that began in the last week of September.

Though Nykaa largely operates as an e-commerce platform selling everything from global cosmetic brands to jewellery, its physical stores, targeting Indian consumers wanting to buy touch-and-feel products, have also contributed to rise in sales.

"Our online and offline presence in beauty has delivered strong growth with improving margins," Falguni Nayar, managing director and chief executive officer, said in a statement.

"Post COVID, our accelerated investments in new store rollouts as well as store upgradation has resulted in improved footfalls and higher same-store sales."

Nykaa's gross merchandise value (GMV), or the monetary value of orders across its platforms, jumped 45% to 23.46 billion rupees. GMV from its fashion business jumped 43%, while that from its mainstay beauty and personal care business rose 39%.

The company struck an alliance in October with Dubai-based lifestyle and fashion conglomerate Apparel Group to expand in the Gulf region.

Since Nykaa's bumper market debut in November last year, its shares have tumbled to drop below their IPO price last week. ($1 = 82.6210 Indian rupees)

(Reporting by Nishit Navin in Bengaluru; Editing by Rashmi Aich and Savio D'Souza)