Share price of FSN E-Commerce Ventures, owners of brand Nykaa, on Tuesday fell below the IPO price, ahead of the impending expiry of pre-IPO investors' lock-in on November 10.
The stock, after dipping to as low as ₹1,107.20 on the BSE, closed a tad better at ₹1,110.60 on the BSE. The company hit the market last November at an issue price of ₹1,125.
According to JM Financial, almost 31.9 crore shares are expected to open up for trade on November 10, including about 15.4 crore promoter & promoter group shares.
As 3 other new-age companies (PB Fintech, Delhivery and Paytm) are also expected to see their lock-in expire in Nov’22, potential buyers might be spoilt for choice. Hence, there could be a sharp dip in share price if even a small set of investors decide to liquidate their position, it added.
Pre-IPO investors included Steadview Capital Mauritius Ltd, TPG Growth IV SF Pte. Ltd, Lighthouse India Fund III, along with HNIs like Harindarpal Singh Banga, Narotam Sekhsaria and Sunil Kant Munjal.
However, analysts remain positive on the stock and expect it to rise. JM Financial while retaining Buy rating with a target price of ₹1,780 said, “At CMP, Nykaa is trading at 4.9x/53.9x FY25 Revenue/EBITDA multiple and though that is still at a premium to most of the loss-making new-age companies, this premium could be sustained as not many companies are estimated to deliver GMV/Revenue/EBITDA CAGR of 41/39/71 per cent during FY22-27 period.”
However, ICICI Securities cuts its price target to ₹1,250 from ₹1,400, and maintained its Hold rating. Nykaa continues to invest in growing new businesses along with having resilient unit economics of BPC and fashion vertical driven by focus towards driving higher conversion and quality traffic. Further, investments in the differentiated value proposition of content, curation and convenience are yielding result, it added.
Recently Motilal Oswal analysts met Falguni Nayar, CEO, FSN E-commerce Ventures (Nykaa). Nayar told them that Nykaa has strived to create a customer experience at par with international standards set by the likes of Amazon and Flipkart. “It worked with its brand partners to create mini SKUs or access packs specifically for the Indian market.”
By collaborating with a number of influencers, Nykaa was able to reach out to a wide audience and promote multiple brands and their products. “This network of influencers and customers has only grown from strength to strength and is one of Nykaa’s biggest competitive advantages today,” she added.