nykaa: Nykaa market cap crosses Rs 1 lakh crore: Should investors book profits?

NEW DELHI: Shares of beauty start-up Nykaa had a blockbuster debut on Wednesday with a 79% premium on listing. Its market capitalisation crossed Rs 1 lakh crore. Shares of FSN E-Commerce Ventures, the parent entity that owns Nykaa, opened for trading at Rs 2,018 on the National Stock Exchange, up 79% from its issue price of Rs 1,125 per share. After listing, shares of Nykaa scaled a high of Rs 2,129, up 89% versus the issue price. FSN E-Commerce Ventures is the country’s first woman-led unicorn to hit the stock market, making founder Falguni Nayar India’s richest self-made female billionaire. She is now worth about $6.5 billion, according to the Bloomberg Bilionaire Index. Nayar owns about half of the company with her husband and their twin children. The promoter family will continue to hold a 51% stake despite the IPO. Nykaa’s IPO consisted of a fresh issue of Rs 630 crore and an offer for sale worth Rs 4,722 crore. At the upper end of the price band one lot of 12 Nykaa shares in the IPO cost Rs 13,500. Nykaa’s IPO has received stellar response from both institutional as well as retail investorsThe IPO witnessed a huge demand from qualified institutional buyers as the portion reserved for them was subscribed 91.18 times. The portion set aside for retail investors was subscribed 12 times and the number of shares set aside for non-institutional investors was booked over 100 times. ‘Book 50% of the profits’Since the shares have listed at around 79% premium, investors should book 50% profit and keep the remaining 50% for long-term with a minimum two year time-horizon. “Those who got Nykaa IPO through allotment are advised to book 50% profit and keep the rest 50% for 2 years at a target of Rs 3,600. However, for those who missed to get Nykaa shares during allotment are advised to wait for some profit-booking and buy at around Rs 1,900 per share levels for two year target of Rs 3,600,” said Ravi Singhal, vice chairman at GCL Securities. ‘90% listing gains'”It is currently trading around the level of Rs 2,200 and is offering more than 90% listing gains. The category meant for qualified institutional buyers was subscribed 91.18 times, non-institutional investors 112.02 times and retail individual investors 12.24 times…Investors who solely subscribed the issue for listing gains can consider booking profits. Considering its prospects, long term investors can hold this stock for medium to long term, if allotted,” said Likhita Chepa, senior research analyst at CapitalVia Global Research. ‘Wait for a correction to buy further’According to Santosh Meena, head of research at Swastika Investmart, Nykaa is among the few profitable new edge businesses that is focused on high-growth and in the right business where it may continue to grow in double digits for many years. “We are expecting upside momentum may continue for at least 1-2 days then it may be stabilized for some time because valuation could be a concern after a big listing gain however 2000 level could act as a support level in the near term. It may head towards 2100/2200 levels even after a big opening. Those who were playing for listing gain can keep a stop loss of Rs 1,950 while aggressive investors are advised to hold this stock for the long term because it is one of the few stocks in new edge companies to own into your portfolio. It is difficult to buy after a big gain at opening however fresh investors can accumulate in parts where they can buy 25℅ at the opening of what they want to invest into this stock while if it witnesses any correction towards 1,800 level then they can add more,” added Meena. The company runs beauty and personal care business under the Nykaa vertical, as well as an apparel and accessories business under the Nykaa Fashion vertical. It also operates an offline channel, comprising 80 stores across 40 cities in India in three different store formats, as of August 2021. “Nykaa has been able to create strong consumer following and 70% repeat purchase led by inventory led BPC Model which ensures authenticity and guarantee of quality, wide product range offered by Nykaa, 2 million stock keeping units’, 3,826 brands and availability in 24,817 pin codes, consumer education through 1,363 influencers, 39,500 Facebook posts (12.6 million followers) and 1.1 million Youtube subscribers . It also has the ability to bring global brands like Estee lauder, Huda Beauty, Charlotte Tilbury etc, to Indian consumers” said brokerage Prabhudas Lilladher. Nykaa is India’s biggest online marketplace for beauty, personal care and fashion brands. Motilal Oswal is also bullish about Nykaa, given its leadership position in online BPC market, customer-centric approach, profitable tech platform and capital-efficient business model.

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