Rating Rationale
February 06, 2025 | Mumbai
FSN E-Commerce Ventures Limited
Rating upgraded to 'Crisil A/Stable'; Corporate Credit Rating Withdrawn
 
Rating Action
Total Bank Loan Facilities RatedRs.135 Crore
Long Term RatingCrisil A/Stable (Upgraded from 'Crisil A-/Positive')
 
Corporate Credit RatingCrisil A/Stable (Upgraded from 'Crisil A-/Positive'; Rating Withdrawn)
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has upgraded the rating on the long-term bank facilities and corporate credit rating of FSN E-Commerce Ventures Limited (FSN) to ‘Crisil A/Stable’ from ‘Crisil A-/Positive’. The Corporate Credit Rating on the company has been withdrawn at the company’s request. The withdrawal is in line with Crisil Ratings' withdrawal policy.

 

The upgrade reflects improvement in group’s business risk profile with sustained increase in revenues and steadily improving operating profitability. The Group’s revenues have grown to Rs.6386 crores in fiscal 2024 from Rs 5144 crores in fiscal 2023. It reported revenues of Rs. 3621 crore for H1 fiscal 2025 and is  expected to report more than Rs. 7500 crores for full fiscal 2025. This is on account of healthy demand, regular addition and acquisition of new brands, extensive promotional activities and expansion of offline stores.. Operating margin has improved steadily in the past two fiscals and is expected to be above 5.5% for fiscal 2025, and further improve over the medium term, backed by reduction in losses from fashion and B2B distribution segment and better operating efficiencies in beauty segment.

 

Financial risk profile of the group continues to remain strong with moderate debt levels, stronger networth and adequate debt protection metrices. Despite continuous addition of stores and acquisitions. Crisil Rating estimates total outside liabilities to adjusted networth (TOLANW) to be less than 1.75 times in medium term. Liquidity profile is adequate with high cash and bank balances, moderate bank limit utilization and strong cash accruals with moderate repayment obligations.


The rating reflects FSN’s strong business risk profile, backed by its established market position in the e-commerce beauty products segment, diverse product range across categories, long relationships with reputed principals, omni-channel presence, and prudent risk management policies. The ratings also factor FSN’s strong financial risk profile marked by comfortable capital structure and adequate debt protection metrics. These strengths are partially offset by its exposure to intensifying competition, working capital intensity, and yet to stabilize distribution and fashion e-commerce businesses

Analytical Approach

For arriving at its ratings, Crisil Ratings has consolidated the business and financial risk profiles of FSN and its subsidiaries, which are strategically important to, and have a significant degree of operational integration with FSN.

These companies are - The consolidated financial include, 100% consolidation of Nykaa E-Retail  Limited, Nykaa Fashion  Limited, FSN International Private Limited, FSN Distribution  Ltd , FSN Brands Marketing Private Limited, Iluminar Media  Ltd, 99.99% consolidation of Nykaa foundation, 60% of consolidation of Nudge Wellness Pvt. Ltd, 54% of consolidation of Earth Rhythm Private Limited, 51% consolidation of Nykaa-- KK Beauty Private Limited and 90% consolidation of Dot & Key Wellness Pvt Ltd and other step down subsidiaries. FSN has also provided corporate guarantee for the bank facilities of these subsidiaries.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position in e-commerce space and omni-channel presence: FSN has a strong market position in the e-commerce beauty products segment, backed by strong position for the ‘Nykaa’ brand. It has been able to establish and retain a large customer base, leading to repeat orders from majority of the retail customers.  The established position in the e-commerce space, helped it to launch its own brand of products and diversify into fashion and apparels segment as well as beauty offline retail model. It has presence across through more than 210 stores across India, which also helps in acquisition of new customers and ensuring timely delivery of products for the e-commerce segment. Increasing presence in the growing e-commerce segment has helped increase revenues steadily to Rs 6,386 crores in fiscal 2024 from Rs.574 crores in fiscal 2018. The group has reported revenues of Rs. 3,621 crores for first half of fiscal 2025.

 

  • Long relationship with reputed principals and wide product portfolio: FSN has a longstanding relationship with the principals with which it has been associated for more than a decade. It has tie-ups with more than 6700 brands and has consolidated its position over time as one of the leading distributors for some of these brands. Direct purchases from brands in beauty products ensures quality and genuineness of the products being sold. FSN has a diversified product profile with more than 1 lakh stock keeping units (SKUs) across various price categories in the categories of make-up, skin, personal care, hair, wellness, fragrance, among others. Hence, there is no dependence on any single principal, brand, or product.

 

  • Strong financial risk profile: The group's strong financial risk profile is marked by strong networth of Rs 1085 crore (moderated due to fair valuation of put option towards 39% stake in Dot & key) and comfortable gearing and TOLANW ratios of 0.63 times and 1.70 times, respectively, as on March 31, 2024. Despite the capex plans to increase the number of stores the capital structure is expected to remain comfortable over the medium term. The group’s debt protection measures have also been at comfortable level with moderate debt and profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 4.42 times and 0.39 times for fiscal 2024. The debt protection measures expected to be healthy in the medium term with controlled debt levels and improving operating margins.

 

  • Prudent risk management practices: Prudent risk management practices have helped the company mitigate risks inherent in the trading business. Risks such as vendor concentration have been mitigated through onboarding of numerous suppliers, thus reducing dependence on any single supplier. The quick cash conversion cycle and strong relationships with vendors ensure limited inventory-related risk. A robust management information system helps keep track of inventory and expiry dates. Adherence to the risk management policies whilst growing at a rapid pace will remain a key rating sensitivity factor.

 

Weaknesses:

  • Exposure to intense competition leading to pressure on profitability: Although FSN has established its market position in the online beauty products segment, it remains exposed to intense competition from both organized and unorganised offline players and other e-commerce portals. Intense competition requires players to provide periodic discounts and attractive schemes in order to retain and acquire customers. Aggressive expansion by existing competitors or emergence of new large players may impinge upon the profitability and revenue of FSN, and hence remains monitorable.

 

  • Exposure to risks associated with stabilisation of new stores: FSN plans to add 45-50 retail stores per annum, and its future performance will be dependent on its ability to leverage on its brand image to maintain growth while sustaining margins. Moreover, FSN operates on company owned company operated (COCO) model, wherein growth is gradual and the break-even levels are reached  after the store is able to attract optimal volumes, which will depend on its ability to position itself in the locality and attract loyal customers.

 

  • Continued losses in fashion and B2B distribution business: The company’s fashion and B2B distribution segments are yet to generate profits and has led to constrain on overall profitability of the group over the past few years. Higher than expected loss from these segments, may impact the overall credit profile of FSN, and will remain key monitorable.

Liquidity: Strong

FSN Group has strong liquidity driven by expected cash accruals of more than Rs.326-466 in medium term, against moderate repayment obligations of around Rs.0.36-91 crores annually in medium term. Group’s fund-based limits was utilized 72% on an average over the 12 months ended November 2024. Further the group has unencumbered cash and cash balance of Rs. 190 crores as on September 30,2024. The group will continue to incur capex for addition of new stores and acquisition of brands to expand its owned product portfolio, which will be funded through internal accruals and cash and bank balances.

Outlook: Stable

Crisil Ratings believes FSN group will continue to benefit from its strong market position, diverse business segments and strong financial profile

Rating sensitivity factors

Upward factors:

  • Steady increase in revenues, and improvement in operating profitability above 7% driven by positive EBITDA in fashion segment and reduced losses in B2B distribution business, leading to higher cash accruals
  • Sustenance of financial profile and liquidity with controlled working capital cycle

 

Downward factors:

  • Decline in revenue or operating margin below 4.5% resulting in lower cash accruals
  • Stretch in the working capital cycle, significant debt-funded acquisitions or capital expenditure (capex), or any change in existing risk management policies leading to TOLANW above 2.2 times.

About the Group

FSN, incorporated in 2012 in Mumbai, is engaged in e-retailing of beauty and fashion products through three web portals: nykaa.com, nykaaman.com and nykaafashion.com. It also has more than 210 retail stores across India under the Nykaa brand. It manufactures private label beauty products under various brands- majorly Nykaa and Kay Beauty.

 

Further, the group is into selling beauty, hygiene and wellness products through its distribution network to the wholesalers and retailers using online and offline channels of sales. The group has collaborated with some major international brands such as Charlotte Tilbury, Elf Cosmetics, Urban Decay, Foot Locker, Revolve, and Cider.

 

FSN is promoted by Mrs. Falguni Nayar and is managed by her along with her son, Mr. Anchit Nayar and her daughter, Ms. Adwaita Nayar. They are supported by professional management. The company is listed on BSE and NSE.

Key Financial Indicators

As on/for the period ended March 31

Unit

H1-2025

2024

2023

Operating income

Rs crore

3621

6386

5144

Reported profit after tax (PAT)

Rs crore

26.61

39.75

20.96

PAT margin

%

0.73

0.62

0.41

Adjusted debt/adjusted networth

Times

0.77

0.63

0.38

Interest coverage

Times

4.64

4.42

3.75

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Cash Credit & Working Capital Demand Loan NA NA NA 135.00 NA Crisil A/Stable

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

FSN Brands Marketing Private Limited

Full

significant operational and financial linkages (100% subsidiary)

FSN E-Commerce Ventures Limited

Full

significant operational and financial linkages (Parent)

FSN International Limited

Full

significant operational and financial linkages (100% subsidiary)

Nykaa-KK Beauty Private Limited

Full

significant operational and financial linkages(51% subsidiary)

Nykaa E- Retail Limited

Full

significant operational and financial linkages (100% subsidiary)

Nykaa Fashion Limited

Full

significant operational and financial linkages (100% subsidiary)

Fsn Distribution Limited

Full

significant operational and financial linkages (100% subsidiary)

Dot & Key Wellness Private Limited

Full

significant operational and financial linkages(51% subsidiary)

Nudge Wellness Private Limited

Full

significant operational and financial linkages(60% subsidiary)

Iluminar Media Private Limited

Full

significant operational and financial linkages(100% subsidiary)

Nykaa Foundation

Full

significant operational and financial linkages(99.99% subsidiary)
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 135.0 Crisil A/Stable   -- 07-02-24 Crisil A-/Positive 07-02-23 Crisil A-/Stable 12-12-22 Crisil A-/Stable Crisil BBB+/Positive
      --   --   --   -- 03-08-22 Crisil A-/Stable --
      --   --   --   -- 07-07-22 Crisil A-/Stable --
      --   --   --   -- 13-05-22 Crisil A-/Stable --
Non-Fund Based Facilities ST   --   -- 07-02-24 Crisil A2+ 07-02-23 Crisil A2+   -- --
Corporate Credit Rating LT 0.0 Withdrawn   -- 07-02-24 Crisil A-/Positive 07-02-23 Crisil A-/Stable 12-12-22 Crisil A-/Stable         CCR BBB+/Positive
      --   --   --   -- 03-08-22 CCR A-/Stable --
      --   --   --   -- 07-07-22 CCR A-/Stable --
      --   --   --   -- 13-05-22 CCR A-/Stable --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit & Working Capital Demand Loan 15 ICICI Bank Limited Crisil A/Stable
Cash Credit & Working Capital Demand Loan 95 Kotak Mahindra Bank Limited Crisil A/Stable
Cash Credit & Working Capital Demand Loan 25 Citibank N. A. Crisil A/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
CRISILs Criteria for Consolidation

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