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Nykaa IPO opens today: Should you subscribe to the share sale?

Nykaa IPO opens today: Should you subscribe to the share sale?

Nykaa will allot shares on November 8 and is likely to make its debut on the BSE and the NSE on November 11, 2021

Nykaa IPO: Price band of the issue has been fixed at Rs 1,085-1,125 per share. The share sale will close on November 1. Nykaa IPO: Price band of the issue has been fixed at Rs 1,085-1,125 per share. The share sale will close on November 1.

The initial public offering  (IPO) of online beauty e-commerce platform Nykaa will open today. Price band of the IPO has been fixed at Rs 1,085-1,125 per share. The share sale will close on November 1.

The firm, operated by FSN E-Commerce Ventures, aims to raise Rs 5,350 crore by going public. The share sale comprises equity shares aggregating up to Rs 630 crore (fresh issue) and an offer for sale of up to 41,972,660 equity shares being offered by the selling shareholders (offer for sale or OFS).

Nearly 2,50,000 equity shares have been reserved for employees. A retail investor can apply for a minimum of 12 shares or 1 lot for which Rs 13,500 will have to be spent. One can apply for a maximum of 14 lots, comprising 168, shares for which bids worth Rs 1,89,000 will have to be placed.

The company received market regulator Sebi's nod for the IPO earlier this month, along with six other firms. The firm will allot shares on November 8 and is likely to make its debut on the BSE and the NSE on November 11, 2021.

Falguni Nayar, Sanjay Nayar, Falguni Nayar Family Trust And Sanjay Nayar Family Trust are the promoters of the company.

Post the IPO, their stake will fall to 52.56 per cent from the current 54.26 per cent. Kotak Mahindra Capital, Morgan Stanley India, Bank of America Securities, Citigroup Global Markets India, ICICI Securities and JM Financial are the merchant bankers to the issue.

Brokerages are positive on the prospects of the IPO.

Angel One has given a subscribe call to the issue.

"The IPO is being valued at price/sales of 21.0-21.8 times FY2021 revenues of Rs 2,441 crore. The company has also posted strong revenue CAGR of 48.2% between FY2019-20 despite the Covid crisis and register a profit in FY2021. While valuations may appear to be expensive on a P/E basis, Nykaa is one of the very few profitable Unicorns in India and we believe that the company is well positioned to benefit from the exponential growth in the online beauty and fashion retailing business over the next decade. Hence, we believe that that the valuations are justified and hence we recommend SUBSCRIBE to the issue."

Elara Securities has given a subscribe call to the issue. "Expansion  in  fashion  may  mar  profitability  given heavy investments in discounts, marketing. Multiple re-rating to 12-14 times one-year forward EV/sales should percolate over time on Nykaa's multi-platform approach (successful execution in Nykaa Man and Nykaa Fashion), which is a niche platform currently (largely BPC led)," the brokerage said.

Motilal Oswal is positive on the IPO with a long-term view.

"We like Nykaa given its leadership position in online BPC market, customer centric approach, profitable tech platform and capital efficient business model. The issue is valued at 16.1 times FY22 EV/Sales on a post issue and annualized basis, which seems to be similar to other Indian unicorns. We believe Nykaa is rightly placed to tap the high growth digital/online penetration in BPC/Fashion market. We recommend Subscribe. Investors with high risk appetite can Subscribe for listing gains given fancy for unique and first of its kind listing in the e-commerce space," the brokerge said.

Anand Rathi said, "Considering the future prospect for the company and it being placed at a sweet spot as the first mover advantage, we assign “Subscribe-Long Term” Rating to this IPO."

KR Choksey is positive on the IPO. "We expect Nykaa to benefit from prevailing tailwind in the industry, its strong technology led platform, strong relationship with global brands, diverse portfolio of own brands, content first approach, Omni channel presence, loyal customer base, planned expansion in Middle East and Europe, growth in Tier II & III cities and strong management team. Considering the prevailing opportunities, investors should look to invest in Nykaa's IPO for listing gains as well as long term opportunity it presents," the brokerage said.