Eternal, Nykaa growth improves, but valuations still demand profit proof
Five years after the 2021 IPO wave, Eternal and Nykaa have delivered strong income growth and better margins. But rich earnings multiples—and reported profits partly supported by other income—leave their investment case tied to sustained operating-profit expansion.
What happened
Eternal (formerly Zomato) · India’s 2021 new-age IPO cohort, including Eternal/Zomato and Nykaa, has delivered strong growth and improving margins, but premium
Key facts
- Eternal FY26 total income: ₹55,760 crore
- Eternal FY22-FY26 income CAGR: over 80%
- Eternal adjusted EBITDA margin: -44% in FY22 to 2.2% in FY26
- Eternal stock gain since IPO: about 341%; Nifty 50 TRI gain: 47%
- Nykaa FY22-FY26 total income CAGR: 27.5%
- Eternal FY26 net profit: ₹366 crore; other income: ₹1,396 crore
- Nine companies' combined FY26 net profit: about ₹2,400 crore
- Nine companies' combined market capitalisation: over ₹6.25 lakh crore
- Eternal FY26 P/E: about 572x
- Nykaa FY26 P/E: 336x
- Paytm FY26 P/E: 111x
- PB Fintech FY26 P/E: around 98x
Why this matters
Strategic buyers and partners should prioritize targets with demonstrable operating-profit scalability, since high-growth retail assets without proven core profitability may face sharper valuation resets.
What to watch
- Quarterly adjusted EBITDA and contribution-margin progression versus revenue growth.
- Share of reported profit attributable to other income, fair-value gains or non-core items.
- Free-cash-flow conversion after lease payments, capex, working-capital movements and expansion investment.
- Customer-acquisition cost, repeat purchase rates, order frequency and incentive intensity.
- Quick-commerce and beauty-category competitive pricing, delivery-fee changes and marketing-spend escalation.
- Advertising, seller-services and private-label revenue mix as indicators of higher-margin monetization.
- Management guidance changes on profitability timelines, store/dark-store additions and capital expenditure.
- Relative P/E and EV/sales movements versus traditional retail, internet platforms and other new-age financial/consumer companies.
- Shift investor communication from adjusted EBITDA milestones toward segment-level operating profit, cash conversion and free-cash-flow disclosures.
- Reduce reliance on discount-led growth by increasing advertising, subscription, seller services and private-label monetization where customer retention supports it.
- Tighten capital allocation for quick-commerce, warehousing, technology and brand-marketing expansion; require city-, category- and cohort-level payback evidence.
- Use a stronger equity currency selectively for acquisitions or strategic partnerships before any material multiple compression, while avoiding deals that dilute margin credibility.
- Prepare for more investor scrutiny of other income by clearly separating treasury gains, financial income, share-based compensation and recurring operating earnings.