FSN E-Commerce Ventures, the operator of Nykaa and Nykaa Fashion chain, traded at more than 60 percent premium in the grey market, ahead of its listing. The stock is likely to make a debut on the BSE and NSE on November 10.
The company successfully raised Rs 5,351.92 crore through its public issue at a price of Rs 1,125 per share. The offer was opened for subscription during October 28-November 1.
The IPO had seen a massive subscription of 81.78 times, receiving bids for 216.59 crore equity shares against offer size of 2.64 crore equity shares. Qualified institutional buyers had put in bids 91.18 times the portion set aside for them, and non-institutional investors' reserved portion was subscribed 112.02 times. A part set aside for retail investors was subscribed 12.24 times and that of employees saw 1.88 times subscription.
Nykaa shares were available at a price of Rs 1,725-1,825 in the grey market, resulting into a premium of Rs 600-700 or 53.3-62.2 percent over the final IPO price of Rs 1,125 per share, the IPO Watch and IPO Central data showed.
The grey market is an unofficial platform, where the trading in IPO shares start at the time of announcement of price band and continue till the listing of shares on the bourses.
"I expect the listing gain to align with the grey market premium, with Nykaa posting the most significant premium with its strong brand image, superior management, financials, and business model," said Sonam Srivastava of Wright Research.
Divam Sharma of Green Portfolio expects Nykaa to be a bumper listing with 50-70 percent listing gains for IPO investors.
The offer of Nykaa was composed of a fresh issue of Rs 630 crore and an offer for sale of Rs 4,721.92 crore by promoter and investors.
Banker-turned-businesswoman Falguni Nayar-owned firm will utilise net proceeds from its fresh issue for expansion, repaying of debts and brand visibility.
FSN E-Commerce Ventures operates its beauty & personal care segment under Nykaa vertical and apparel & accessories under Nykaa Fashion.
Nykaa's key operating metrics have improved significantly over the years helping the company turn profitable. "It has seen a strong ramp-up in its GMV (gross merchandise value) from Rs 1,650 crore in FY19 to Rs 4,050 crore in FY21. Despite stores remaining shut during Q122, Nykaa recorded its highest GMV at Rs 1,470 crore. A sharp increase in GMV portrays a strong scaling-up opportunity," said Piyush Nagda, Head - Investment Products at Prabhudas Lilladher.
He said they believe Nykaa can sustain a CAGR of around 35 percent in sales, 50 percent in earnings before interest, tax, depreciation and amortisation (EBIDTA) over the coming few years with double digit margins. "These factors combined with increasing Gen-z and millennial population provides strong headroom for growth in fast growing Beaty, Personal care and fashion market."
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