Sorry for curbing your enthusiasm and optimism, but having seen you from the days of not investing citing valuations or uncertainty, to the days of investing in Nykaa with high optimistic views, I want to say this.
What is a brand in the context of BPC? Is a brand a matter of feeling or does it also have a skin component attached it, do all brands suit all skins, all bodies? How long will it take Nykaa to sell only its own brands? What moat does it actually have, that no matter how big the new entrants are, how large the reach is for the existent players, that Nykaa’s moat is impenetrable like Apple?
Bata’s sales have grown 4% in the last 10 years, while Relaxo had a growth of 12%. I am sure Bata was perhaps one of the very few brands in the segment, if not the top brand back in the day. So I am not too sure even if a company with the backing of PE, builds brands which can capture the entire market, with no competitor in sight, more so when the market is fragmented with other popular brands and local brands in the segments, that you say Nykaa can enter – clothes, shoes etc.
Not that you don’t know about these, I am sure you do, but just saying.
Also, since you are bullish and wanted to know how to value Nykaa and now you are talking about brands, I would suggest you to study the growth of Apple, particularly since the time it has built a global name, may be after the first iPhone release, and has been growing the name ever since, which I think even Buffett acknowledged and bought a stake, and the only brand that comes to mind right away.
Not invested, and if I get convinced from any perspective, I will have a position.
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