Unlocking Growth,Together

Our
Team
Anand V Bhat Kedarnath
Managing Partner Managing Partner

Rohit Jain Sukruth Katta Rishi B U Vasavi

Partner Partner Senior Associate Senior Associate

Sameer Ashwin.S.Sharjin
Associate Associate
To,
The Board
FSN E-Commerce Ventures Limited.
A2, 4th Floor, Cnergy IT Park,Prabhadevi,
Mumbai 400 025,
Maharashtra, India

Date of Report: 28-February-2025

Subject: Strategic Analysis and Advisory Report – Nykaa

Dear Sir/Madam,

We report on the results of our strategic analysis and advisory procedures conducted for FSN E-Commerce Ventures Limited. ("Nykaa"). The analysis
focuses on strategic decisions,market positioning, financial performance, operational strategy, etc. We have prepared this report based on the scope of
work agreed with the management of Nykaa, as per the engagement letter dated 28th Jan’2025.

This report was based on the inputs shared by the management team of Nykaa and our interactions with the following key personnel from the Target
team (Management).

This report has been prepared solely for the purposes of the strategic advisory engagement and should not be relied upon for any other purpose. Save as
expressly agreed by us in writing, we accept no liability to anyone else or for any other purpose in connection with this report. The report may not be provided
to any third party without our prior written consent, unless required by law or court order.

Your’s Sincerly,
Anand V Bhat
Partner
NYKAA AT A GLANCE
A gateway to personalised lifestyle experiences
Nykaa’s omnichannel platform, brings together a wide array of beauty and fashion brands across their online and
offline channels to provide a curated and differentiated lifestyle choice to our customers. While offering a diverse
range of products, Nykaa aims to create delightful and seamless shopping experiences, empowering customers to
feel confident and inspired.

Synergy Partners
Unlocking Growth, Together
Synergy Partners symbolises integrity, unity and wholeness. It is with these core values at heart, we at Synergy
Partners cater to our clients. Recognising our clients’ needs and delivering value buttresses our strategy at Synergy
Partners. We provide our clients with unparalleled, wholistic transaction advice backed by deep industry knowledge
and utmost care.
 FSN E-Commerce Ventures
Limited Amount in crores
Metric FY2022 FY2023 FY2024

Revenue ₹ 3,774 ₹ 5,144 ₹ 6,386

Direct Costs (COGS) ₹ 2,800 ₹ 3,800 ₹ 4,500

Gross Profit ₹ 974 ₹ 1,344 ₹ 1,886

Indirect Expenses (e.g., marketing, distribution, admin) ₹ 900 ₹ 1,320 ₹ 1,800

Net Profit Before Tax (NPBT) ₹ 74 ₹ 24 ₹ 86

Tax Expense ₹ 33 ₹3 ₹ 46

Net Profit ₹ 41 ₹ 21 ₹ 40

Source: Annual Report

Should Nykaa focus exclusively
on growing its private-label
portfolio instead of
relying on third-party brands?
It’s Time to
Own the
Profits!!
Source: Annual Report
Why Prioritize Private Labels Over Third-party brands
Higher Margins & Profitability
Private label products have higher gross margins (40-45%) compared to third-party brands.
Reduces dependency on external brands, increasing pricing power and profitability.

Strong Brand Loyalty & Differentiation

Exclusive products drive customer stickiness and brand loyalty.
Helps Nykaa differentiate itself from competitors like Amazon & Flipkart.

Faster Revenue Growth & Market Control (112% growth in 3 years)

Nykaa brands have outpaced overall category growth in beauty & fashion.
Direct control over pricing, promotions, and inventory, ensuring a better customer experience.

Synergy with Nykaa’s Omnichannel Model

Strengthens the Nykaa ecosystem, enhancing customer retention & lifetime value.
 Should Nykaa concentrate
solely on its core beauty
business instead of expanding
its fashion vertical?
Appetizing much? Make your better half smell
like harley davidson
What is Levi’s ? This was levi’s having identity crisis
 Vertical-wise
GMV (%)

FY 2022- FY 2023-
23 24

Source: Annual report

Why Prioritize Beauty Over Fashion Expansion
Proven Market Leadership
Nykaa's beauty segment is a flagship strength with strong brand recognition and high customer loyalty.

Superior Profitability & Margins

Beauty products yield higher margins and offer greater pricing power compared to the volatile fashion market.
Focusing on beauty enables cost optimization from sourcing to marketing, improving overall margins.

Operational Efficiency
Concentrating on a single vertical reduces complexity, streamlines supply chain management, and minimizes overhead costs.
Deep expertise in beauty fosters innovation, quicker product rollouts, and targeted marketing strategies.

Brand Differentiation & Focus

Staying true to its core identity prevents brand dilution.
A focused approach enhances customer trust and reinforces Nykaa’s market positioning as the go-to beauty destination.

Risk Mitigation
The fashion vertical is highly competitive and trend-sensitive, posing risks that could distract from Nykaa’s proven success in
beauty.
Prioritizing beauty limits exposure to new market uncertainties while maximizing the value of current operations.
 Should Nykaa optimize costs and prioritize
profitability, or should it continue
reinvesting in marketing and infrastructure to
fuel future expansion?
 Short-term wins feeds EGO, Long-term plays build
Market Leadership & Long-Term Dominance:
Empires
Helps capture untapped markets, and enhance distribution channels, leading to higher market share. Nykaa can solidify its
position as the go-to beauty destination, fending off competition from Sephora, Amazon, and emerging D2C brands

Economies of Scale & Cost Efficiency:

Reduces per-unit costs over time, leading to higher margins in the long run, even if initial investments lower short-term
profits.

Consumer Loyalty & Brand Equity:

Boosts customer retention, increasing lifetime value.

Competitive Edge in Omnichannel Retail:

Create a seamless customer experience, driving higher engagement and sales.

Lessons from Beauty Industry Leaders:

Brands like Ulta Beauty & Sephora thrived by reinvesting in growth, while those focusing on profitability too soon (E.g.
Revlon) struggled with stagnation.
 What if Nykaa
Concentrates solely on its core beauty business instead of
expanding its fashion vertically

Chases for Market Share, not Just Margins

Prioritize Private Labels for Growth & Profitability

Now, this might sound like an overhyped prediction, but let’s
just say—you’ll see the real impact when the time comes
Expected Impact:
1. Focusing Solely on Core Beauty Business
⚬ Higher profitability due to reduced marketing and operational costs in fashion.
⚬ Market dominance in India's beauty segment with deeper penetration into Tier 2+ cities.
⚬ Improved inventory management and economies of scale.

2. Prioritizing Private Labels for Growth & Profitability

⚬ Higher gross margins (private labels currently contribute ~12% to beauty GMV and 13% to fashion GMV​).
⚬ Competitive differentiation via proprietary product development and exclusive offerings

3. Chasing Market Share Over Margins

⚬ Aggressive customer acquisition via competitive pricing, loyalty programs, and omnichannel expansion.
⚬ Increased dominance in Beauty & Personal Care.
⚬ Superstore by Nykaa (B2B) to drive retailer adoption, further increasing market share.
 Amount in crores
FY 2024-25 FY 2025-26 FY 2026-27
Metric FY 2022-23 FY 2023-24
(Projected) (Projected) (Projected)
Revenue 5,144 6,386 8,000 - 8,500 9,500 - 10,500 11,000 - 12,500
Revenue Growth (%) 36% 24% 25-30% 20-25% 15-20%
GMV 9,743 12,446 15,500 - 16,500 19,000 - 20,000 22,000 - 25,000
GMV Growth (%) 41% 28% 25-30% 22-27% 18-22%
EBITDA 256 346 500 - 550 750 - 850 1,000 - 1,200
EBITDA Margin (%) 5.00% 5.40% 6-7% 7-8% 8-10%
Profit After Tax 21 40 70 - 80 100 - 110 120 - 150
PAT Margin (%) 0.40% 0.60% 0.9 - 1.0% 1.1 - 1.3% 1.5 - 2.0%
Beauty GMV Share (%) 73% 73% 75% 78% 80%
Fashion GMv Share (%) 27% 27% 25% 22% 20%
Private Label GMV Share (%) 12-13% 12-13% 15-18% 18-22% 20-25%
Gross Margin (%) 44.30% 42.90% 44-45% 46-47% 48-50%
Annual Transacting Users (Mn) ~10.5 11.7 13-14 16-17 20+
Superstore (B2B) Transacting
1,09,360 1,94,950 2,50,000+ 3,00,000+ 4,00,000+
Retailers

Source: Synergy Projections

The projected figures presented are based on certain assumptions, market trends, and internal estimates. While these projections reflect a
realistic and data-driven outlook, actual results may vary due to changes in market conditions, competitive landscape, economic factors,
and consumer behavior.These estimates should be viewed as guiding benchmarks rather than guaranteed outcomes.
Disclaimer
The information and recommendations provided in this report and through consulting services are based on the data and information available at the time
of analysis. Synergy Partners ("Consultant") makes no representations or warranties, express or implied, regarding the accuracy, completeness, or reliability
of the data, nor does the Consultant guarantee the outcomes or results of implementing the proposed strategies.

Limitations of Advice:
The advice and strategies presented are intended to be general guidance based on our professional judgment, experience, and analysis of the client's business
situation. All recommendations should be evaluated in conjunction with the client’s own

Assumptions and Data Sources:

The consultant’s analysis is based on the assumptions provided by the client, as well as publicly available data and internal reports. Any changes in the
assumptions or data may significantly affect the recommendations provided.

No Guarantees of Success:
While every effort is made to ensure that recommendations are well-reasoned and actionable, the Consultant cannot guarantee specific outcomes,
improvements, or results. Business conditions and external factors may influence the success or failure of the proposed strategies.

Client Responsibility:
The client is ultimately responsible for any decision-making and actions taken based on the information provided in the consulting report. The Consultant
does not accept responsibility for any financial, operational, or strategic outcomes resulting from the implementation of the recommendations.

Confidentiality:
The Consultant agrees to maintain confidentiality regarding all proprietary information shared by the client, in accordance with the signed confidentiality
agreement (if applicable). However, the Consultant is not responsible for the unauthorized disclosure of information by third parties or external entities.

Limitation of Liability:
The Consultant’s liability for any damages arising out of the advice provided will be limited to the amount paid by the client for the specific consulting services directly
related to the issue at hand.
 Client Testimonials

Synergy Strategic Synergy Strategic Partnering with Synergy Working with Synergy
Their personalized
Consultants have been a Consultants have Strategic Consultants has attention and
crucial part of our Strategic Consultants has
provided invaluable been a fantastic decision results-driven
business's success. Their been a game-changer for
insights that have for our company. Their strategies have
guidance has helped us our business. Their expert
significantly improved in-depth analysis and helped us overcome
streamline our processes advice and strategic
our decision-making tailored strategies have challenges and
and optimize our approach have helped us
process. Their team’s given us the clarity and reach new
performance. Their streamline our operations
deep understanding of direction we needed to milestones. We
approach is both and drive growth. The
market trends and achieve our goals. Their highly recommend
practical and innovative, team’s dedication and
business strategies has team's professionalism them for any
making them an professionalism have
helped us achieve better and expertise have made business looking to
invaluable partner for exceeded our
results in a short time. take the next step."
any business seeking to a lasting impact on our expectations, and we
We are grateful for their — Anil Kapoor,
grow." — Abhay, growth." — Supreeth highly recommend their
Business Development guidance and highly Head of Strategy
HR, CFO services to anyone looking
Manager recommend them to
to elevate their business!"
any business looking to
— Vikas Kumar, CEO
scale." — Lenora,
Marketing Director
 Thank You

We appreciate the opportunity to be of service.

For any questions or clarifications you may have in this regard, please contact

Anand.Bhat@Synergypartners.in Kedarnath@Synergypartners.in

+1 361-265-0051 +86 399-265-8951

The proposal and information herein is solely made available to the intended user, in response to a specific request.
Please do not circulate this document outside of your organisation. Thank you for your understanding