Nykaa IPO opened for subscription today, with the fashion e-commerce brand looking to raise Rs 5,352 crore in the primary market. Ahead of the IPO (Initial Public Offering), Nykaa’s parent company FSN E-Commerce Ventures Ltd managed to raise Rs 2,395 crore from 174 anchor investors, including marquee names such as Blackrock, Fidelity, JP Morgan, HDFC, ICICI, Nomura, and Abu Dabhi Investment Authority. Shares of the company were trading at a strong premium of around Rs 600-650 per share in the grey market, according to people dealing in unlisted shares. Investors can bid for the IPO, beginning today, in fixed price band of Rs 1,085-1,125 per share. The issue will close on Monday.
Investors can bid for Nykaa shares in a bid lot of 12 shares. This translated to a minimum investment of Rs 13,500 per investor. 75% of the issue is reserved for qualified institutional buyers (QIB), while 15% is for non-Institutional investors and 10% for retail investors. The IPO includes a fresh issue of equity shares worth Rs 630 crore while the remaining Rs 4,721 crore will be an offer for sale (OFS) by existing investors of the company and the promoter. Post issue, promoter shareholding in the company will drop to 52.6% from the current 54.2%. On the other hand, public shareholding will increase to 47.4% from 45.8%.
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ICICI Direct: Unrated
“FSN clocked EBITDA margins of 6.6% in FY21 with RoCE at 12.9%. At the upper end of the price band it is valued at 22x P/S on FY21,” the brokerage firm said. Nykaa is one of the leading lifestyle focused consumer technology platforms and is the preferred destination for luxury & private products in India, analysts highlighted. Among key risks associated with the brand, ICICI direct said that Nykaa is dependence on key external brands, sellers & suppliers and faces strong competition in the online space.
KR Choksey: Subscribe
Analysts said they 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. “Considering the prevailing opportunities, investors should look to invest in Nykaa’s IPO for listing gains as well as long term opportunity it presents,” they said.
Elara Capital: Subscribe
Nykaa is likely to trade at a huge scarcity premium versus global peers in the online BPC space, said analysts at Elara Capital. “We believe, Nykaa could trade at one-year forward EV/sales of ~6-8x, purely based on its core BPC offering. However, the issue price is already at 10.2x FY24 EV/sales, factoring in a premium multiple, backed by growth in the fashion business,” they added.
Marwadi Shares and Finance: Subscribe (with caution)
The brokerage firm said that Considering the TTM (Jun 2021) adjusted EPS of Rs.2.54 on post issue basis, the company is going to list at a P/E of 443.46 with a market cap of Rs 53,204 crore. “We assign “Subscribe (With Caution)” rating to this IPO as company is one of the leading lifestyle focused consumer technology platform and a preferred destination for luxury and prestige products in India for consumers and brands. However, valuations on an absolute basis based on past financials keeps us cautious at the same time,” they added.