FSN E-Commerce Ventures Limited (“Nykaa”) incorporated in April 24, 2012, are a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. It has a diverse portfolio of beauty, personal care and fashion products, including its own brand products manufactured by them and as a result, they have established themselves as not only a lifestyle retail platform, but also as a consumer brand. Nykaa has two business verticals i) Nykaa: Beauty and personal care and ii) Nykaa Fashion: Apparel and accessories.
Nykaa offers consumers an Omni-channel experience (both online and offline) with an endeavour to cater to the consumers’ preferences and convenience. As of March 31, 2021, Nykaa offered approximately 3.1 million SKUs from 4,078 national and international brands to their consumers across business verticals. Nykaa opened their first physical store in 2014, and has 80 physical stores across 40 cities as of August 31, 2021. Their physical stores currently exist in 3 formats, Nykaa Luxe, Nykaa on Trend and Nykaa Kiosks.
Promoters & Shareholding:
Falguni Nayar, Sanjay Nayar, Falguni Nayar Family Trust And Sanjay Nayar Family Trust are the company promoters.
| Pre Issue Share Holding | 54.22% |
| Post Issue Share Holding | 52.56% |
Public Issue Details :
Offer for sale: Fresh issue of approx. 5,600,000 equity shares of Rs. 1 aggregating up to Rs. 630 Cr and OFS of approx. 41,972,660 equity shares aggregating up to Rs. 4,721.92 Cr.
Total IPO Size : Rs. 5,351.92 Cr.
Price band: Rs. 1085 – Rs. 1125.
Objective: To set up new retail stores, new warehouses, fund capital spending and repay debts.
Bid qty: minimum of 12 shares (1 lot) for Rs. 13,500 and maximum of 14 lots.
Offer period: 28 th Oct 2021 – 1 st Nov 2021.
Date of listing: 11 th Nov 2021.
Also read : https://www.mymoneysage.in/blog/market-outlook-oct21/
Pros:
- One of India’s leading specialty beauty and personal care companies.
- Deep, symbiotic relationship with major brands offering their products on Nykaa’s platform for sale.
- Professional and experienced management team.
- Diversified portfolio of beauty, personal care and fashion products.
- It offers Omni channel shopping (both online and offline) experience.
- It offers excellent consumer service and fulfilment.
Cons:
- Changing regulations in India could lead to new compliance requirements that are uncertain.
- The company has incurred losses in the past, which may adversely impact the value of the equity shares.
- It has certain contingent liabilities, which, if materialize, may adversely affect its results of operations, financial condition and cash flows.
- It operates in a highly competitive industry.
Subscribe or avoid?
Sectorial outlook – India’s retail market was sized at Rs.55 trillion in 2020, reflecting a CAGR of 5% over the last 4 years and it is expected to bounce back in the coming years to grow at a CAGR of 11% to reach approximately Rs.91 trillion by 2025. The Beauty and Personal Care Market in India was sized at Rs. 1,267 billion in 2019, growing at a CAGR of 13% in the last 3 years and it is projected to grow at a CAGR of 12% to reach Rs. 1,981 billion in 2025 with a CAGR of 7.7%. This growth is enabled by the rising middle class, soaring income levels, increasing demand from Tier 3-4 cities and Rural markets, rise in youth spending, improvement in infrastructure and the entry of new Indian and global brands across the product categories hence this is expected have positive impact on the company and its business.
The financials (revenue and net profit) are shown in graph below:
Valuation – For the last 3 years average EPS of Rs 0.44, P/E ratio is around 2556x. On the upper price band of Rs 1125 and EPS of Rs 1.34 for FY21, the P/E ratio works out to be 839x. There are no listed peers. The company is asking P/E in the range of 839x to 2556x hence it seems to be very expensive. However the GMP for this IPO currently is around 70%.
Recommendation – Considering the current bull run, and also the GMP, as well as the financials of the company, Investors with very high risk appetite can “SUBSCRIBE” to this IPO with a possibility of listing gains, moderate and conservative investors can skip this IPO.
Disclaimer:
This article should not be construed as investment advise, please consult your Investment Adviser before making any sound investment decision. If you do not have one visit mymoneysage.in now.
Also read : https://www.mymoneysage.in/blog/market-outlook-oct21/
