Nykaa makes stellar stock markets debut
PremiumThe robust listing day gains have catapulted market capitalisation of Nykaa to over Rs1 lakh crore, surpassing other stocks in the Nifty such as Hero MotoCorp, BPCL, Indusind Bank, Britannia
MUMBAI : Nykaa’s shares nearly doubled in their trading debut on Wednesday, in an indication the exuberance that has gripped India’s primary market since early this year hasn’t worn off.
Nykaa’s parent FSN E-Commerce Ventures Ltd listed at ₹2,018, a 79% premium over the initial public offering (IPO) price of ₹1,125, underscoring a strong vote of investor confidence. Thereafter, the shares almost doubled in intraday trading before closing at ₹2,205.80 on NSE, gaining 96%.
The robust listing day gains propelled the market value of Nykaa to more than ₹1 trillion, surpassing other Nifty companies such as Hero MotoCorp Ltd, Bharat Petroleum Corp. Ltd, IndusInd Bank, Britannia, Dr Reddy’s, Tata Consumer, Eicher Motors, Cipla and UPL.
To be sure, Nykaa is the only profitable unicorn to be listed on the domestic stock exchanges this year. The company’s valuation is attractive, analysts said ahead of the IPO. With markets flush with liquidity as central banks worldwide pursued easy-money policies during the pandemic, dozens of companies tapped public markets to raise money. Among them are two other unicorns, CarTrade and Zomato, which recently debuted on the local stock exchanges.
“Nykaa is one of the very few profitable new-age companies. Apart from leadership in online beauty and personal care (BPC) in India, Nykaa is also one of the fastest-growing fashion platforms based on gross merchandise value. Nykaa’s key strengths lie in its inventory-led business model for the BPC segment, which allows it to offer authentication for all its products and ensures availability and efficient distribution," said Sneha Poddar, an analyst at Motilal Oswal Financial Services.
Given the 35% market share of Nykaa in online BPC, Poddar believes Nykaa is set to tap the high growth potential in the BPC and fashion market.
Nykaa’s ₹5,350 crore IPO was subscribed 82 times. The share sale ended on 1 November.
Nykaa’s gross merchandise value (GMV) has grown at a 57% compound annual growth rate (CAGR) over FY19-21. GMV, or the total value of merchandise sold over a period, measures the use of the site to sell merchandise owned by others. Revenue and Ebitda increased 48% and 181% CAGR over FY19-21, while the company turned profitable in FY21. Ebitda margin improved to 6.6% in FY21, with free cash flow turning positive.
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Post listing, the promoter’s stake will fall to 52.6% from 54.2%. The funds raised will be utilized to open retail stores and warehouses, debt repayment and marketing.
Analysts at Elara Capital said successful execution in the fashion segment is key to Nykaa’s valuation re-rating in the medium to long term as the company does not enjoy the first-mover advantage in the fashion segment, which is currently dominated by Ajio, Myntra, Amazon and Flipkart among others.
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