Banker-turned-businesswoman Falguni Nayar-promoted FSN E-Commerce Ventures is expected to see a bumper listing of 50-70 percent over the final issue price of Rs 1,125 given the stellar initial public offering (IPO) subscription, growth plans of the company, a strong and profitable business model, and healthy market share in the beauty and personal care segment, experts feel.
The Nykaa and Nykaa Fashion chain operator closed its public issue on November 1, with great subscription numbers of 81.78 times. The offer received bids for 216.59 crore equity shares against the IPO size of 2.64 crore equity shares with support from all investor classes.
Qualified institutional buyers had bought 91.18 times the portion set aside for them, and non-institutional investors put in bids 112.02 times the share reserved for them. A part set aside for retail investors was subscribed 12.24 times and that of employees saw 1.88 times subscription.
Nykaa is India's biggest online marketplace for beauty, personal care and fashion brands. The company delivered 17.1 million orders in FY21 and operates 80 offline stores in 40 cities across India.
The beauty and personal care business comes under the Nykaa vertical, and Nykaa Fashion accounts for the apparel and accessories segment.
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“By virtue of a strong and profitable business model, listing gain can be expected around Rs 750 per share or 66 percent over IPO price,” said Ankur Saraswat, research analyst at Trustline Securities.
Aayush Agrawal, senior research analyst, merchant banking at Swastika Investmart, expects Nykaa to get listed around Rs 1,600-1,700. ”Eyeing the recently listed new-edge business and Nykaa’s growth plan, we expect the company to perform much better,” Agrawal said.
Currently, Nykaa trades at Rs 1,825-1,855 per share in the grey market, which is a massive premium of Rs 700-730 or 62-65 percent over the final IPO price of Rs 1,125, IPO Watch and IPO Central data showed.
The grey market is an unofficial platform for trading in IPO shares. Such trading in IPO shares begins after the announcement of the price band and continues till the listing of shares on the bourses.
“Nykaa was subscribed 81.78 times at the end of day three. Considering the massive investor interest, we expect around a strong 60 percent premium on listing,” said Gaurav Hinduja, analyst at GEPL Capital.
FSN E-Commerce raised Rs 5,351.92 crore via the IPO that was composed of a fresh issue of Rs 630 crore and an offer for sale of Rs 4,721.92 crore by promoters and investors.
In the financial year 2020-2021, its total gross merchandise value (GMV), at Rs 4,045.98 crore, was up 50.7 percent over FY20, while in Q1FY22 its GMV was Rs 1,469.61 crore, 238.8 percent higher than the year-ago period.
The company recorded a 38.10 percent growth year-on-year in revenue from operations at Rs 2,440.89 crore in FY21. It clocked a profit of Rs 61.95 crore for FY21 against a loss of Rs 16.34 crore the previous year. It generated EBITDA (earnings before interest, tax, depreciation and amortisation) of Rs 161.43 crore and margins of 6.61 percent for FY21.
“FSN E-Commerce is India's leading lifestyle focused customer technology platform and is also the most preferred destination for luxury and prestige products in India for consumers and brands like Clinique, Dermalogica, Dove, Estee Lauder, Faces Canada, Forest Essentials, Herbal Essences, Innisfree, Lakme, MAC, Makeup Revolution, etc. Strong network effects leading to increased customer stickiness. Consequently, GMV is increasing against the backdrop of existing and new customers,” said Ankur Saraswat.
He added that the foray into lifestyle apart from the beauty and personal care platform will broaden and deepen customer engagement.
“An omnichannel approach can enhance brand contribution and there are plans to further upscale this proposition with fresh funding. It has a resilient and efficient capital structure-based business with a strong future growth profitability trajectory, diversified products portfolio spanning across 4.078 brands with 3.1 million SKUs (stock keeping units) with online-offline integration that will provide a seamless customer experience, he said.
Due to the above factors, “Nykaa will most likely look at achieving overall profitability this year with consumer shifting towards digital interactions and boost in its business,” Ankur said.
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