Nykaa’s fashion business, which weighed on profitability for more than two years, is beginning to turn around, while its beauty business continues to deliver strong growth, setting the stage for a sharper improvement in earnings, according to a report by Anand Rathi Brokers.
The brokerage has initiated coverage on Nykaa with a ‘Buy’ rating and a 12 month target price of ₹400, against a share price of ₹344 on October 19, 2026. It values the company at 50 times its estimated FY29 EBITDA, citing its leadership in online beauty, growth in premium products and improving profitability in fashion.
Nykaa reported record revenue of around $1 billion in FY26, following two years of volatility after its listing, when sluggish growth and persistent margin pressure in fashion affected its performance. Anand Rathi expects the company's revenue to rise ₹10,022 crore in FY26 to ₹20,251 crore by FY29, implying a compound annual growth rate of 26.4%
The central to this outlook is a two pronged strategy: expanding the higher margin beauty and personal care (BPC) business while improving the economics of fashion, which has historically been a drag on consolidated margins.
Fashion moves from a loss-making drag towards breakeven
Nykaa Fashion’s gross merchandise value (GMV) grew around 30% year on year to ₹4,950 crore in FY26. More significantly, the segment’s EBITDA margin improved to 0.3% in the fourth quarter of FY26, compared with a negative 10.2% in the corresponding quarter a year earlier. The report also puts the fashion business’s EBITDA margin at around 0.1% in early FY27.
High product return rates, advertising and marketing expenditure, and intense competition had previously hurt the segment’s profitability. The brokerage attributes the improvement to operational corrections and a more curated, premium focused assortment rather than growth driven by heavy discounts.
Net sales value (NSV) growth accelerated to around 54% in the first quarter of FY27, supported by demand for women’s apparel, premium western wear and curated home products.
Nykaa Fashion is also targeting a different consumer segment from mass market platforms such as Myntra and Ajio. Its average order value stood at around ₹4,600, approximately 60% above competitors, according to the report. Premium customers accounted for around 50% of its customer mix, while new season inventory made up approximately 25% of its assortment.
The turnaround is important because fashion contributed around a quarter of Nykaa’s overall GMV of ₹19,960 crore in FY26. However, its margins remain structurally thinner than those of beauty, making sustained cost control crucial to the group’s earnings outlook.
The brokerage expects Nykaa’s EBITDA to increase from ₹752 crore in FY26 to ₹2,313 crore in FY29, with margins expanding from 7.5% to 11.4%. It expects EBITDA to grow at a compound annual rate of 45.4% over FY26 to FY29, outpacing revenue growth as operating leverage improves.
Beauty remains the main growth engine
The beauty business continues to underpin Nykaa’s financial performance, accounting for around 75% of its GMV and 85% of its consolidated NSV. Its beauty GMV grew 27% year on year to approximately ₹14,950 crore in FY26, while annual unique transacting customers increased from 10 million in FY23 to 19.7 million in FY26.
The brokerage expects Nykaa to benefit from the expansion of India's beauty market, which it estimates ₹2.1 lakh crore, with the potential to reach ₹3.9 lakh crore by FY31.
Online beauty sales, estimated at ₹57,000 crore in FY26, could grow to ₹1.3lakh crore by FY31, according to the report.
Nykaa is also building its portfolio of owned beauty brands, including Dot &Key, Kay Beauty and Nykaa Cosmetics. The portfolio’s NSV rose to around ₹1,700 crore in FY26 from ₹510 crore in FY23, growing at approximately 50%annually. The brokerage expects it to reach ₹5,100 crore by FY30.
However, the report flags risks from a slowdown in discretionary spending, rising customer acquisition costs and intensifying competition from well-funded players. Continued marketing expenditure could also weigh on near-term margin expansion, while Nykaa’s concentration in urban, higher-income consumers leaves it exposed to the pace of adoption in smaller cities.