FSN E-Commerce Ventures Nykaa’s shares fell 2 percent on Tuesday, falling below their IPO price of Rs 1,125 as the IPO anchor lock-in ends on November 10. The stock was trading 2.75% lower on the NSE at Rs. 1,112.40/piece at 1:15 p.m. The stock has dropped 2% in the last five trading days and 11% in the last month.
As the pre-IPO lock-in period comes to an end, the share price of FSN E-Commerce Ventures, Nykaa’s parent company, fell as much as 2% on Tuesday, falling below its initial public offering price of Rs 1,125.
The stock was trading at Rs. 1,115 on the National Stock Exchange at 2:15 p.m., down 2.5 per cent. In the last five trading days, the stock has lost 3%. It is down 12.67% from the previous month.
After falling as low as 1,107.20 on the BSE, the stock closed a tad higher at 1,110.60.
Nykaa is a Mumbai-based Indian e-commerce startup. Nykaa was launched in April 2012 by Falguni Nayar, a former managing director at Kotak Mahindra Capital Company. It began as an e-commerce portal that curated a variety of beauty and health products. Nykaa is derived from the Sanskrit word nayaka, which means “actress” or “one in the spotlight.” The website was first introduced around Diwali in 2012 and became commercially available in 2013.
It provides beauty, wellness, and fashion products through its websites, mobile apps, and more than 100 physical stores. It became the first Indian unicorn startup led by a woman in 2020.
Nykaa sells both domestically and globally created goods. In 2015, the company transitioned from an online-only model to an omnichannel model and began offering things other than beauty. By 2020, it will have over 2,000 brands and 200,000 products available on its platforms.
According to JM Financial, over 31.9 crore shares, including 15.4 crore promoter and promoter group shares, are scheduled to be traded on November 10.
Potential buyers may be spoiled for choice, as three other new-age companies (PB Fintech, Delhivery, and Paytm) are also slated to have their lock-in end in November’22. As a result, if even a small number of investors decide to sell their stake, the share price could fall sharply, it noted.
While investors have fled Nykaa as e-commerce competition has increased, brokerages remain bullish on the stock, with an average target price of Rs 1,664, implying a 45.5 percent upside potential.
Nomura, a global brokerage firm, has begun coverage on the stock with a target price of Rs 1,365, stating that the risk-reward ratio is quite favourable for long-term investors, with the stock having the potential to double over the next five years.
The Nomura firm also said that it is apart from most internet businesses due to its strong focus on curating brands and assisting clients in their discovery journey. Brands regard it as a critical partner in educating customers and boosting premium product acceptance.
If Nykaa follows Zomato’s lead, its stock may fall much further. On July 25, shares of food delivery company Zomato fell more than 13 percent to new lows after 78 percent of their shares were released from the obligatory one-year lock-in period following the IPO.
Nykaa debuted on the bourses on November 10, 2021, with a hefty 79 percent premium.
Meanwhile, JM Financial is still optimistic about the company. JM Finance said in their statement that the current market price of Nykaa implies good valuations compared to most traditional companies, but that does not take into account the growth seeds that the firm is planting by investing in fashion and e-B2B areas.
The brokerage expects Nykaa’s premium to hold, as few firms are expected to produce gross merchandise value CAGRs of 41 percent, revenue CAGRs of 39 percent, and EBITDA CAGRs of 71 percent between the fiscal years 2022 and 2027.
