The popular brand Nykaa, which you now find a lot in the public domain, is owned by FSN E-Commerce Ventures. The company was promoted by Falguni Nayar, former investment banking head at Kotak Mahindra Capital. Falguni Nayar was also an independent director on the board of Tata Sons. Nykaa was founded in 2012 and has emerged as one of the few profitable online digital ecommerce properties with a niche fashion theme.
The total size of the IPO of Nykaa will be Rs.5,352 crore, consisting of a fresh issue of Rs.630 crore and an offer for sale of Rs.4,792 crore. The IPO will open for subscription on 28th October and closes for subscription on 01st November. Nykaa has a complete portfolio of beauty products, healthcare products, apparel and accessories.
Here are 5 things that you must know about the FSN E-Commerce Ventures (Nykaa) model.
Nykaa has a diverse portfolio of beauty, fashion and personal care. It also provides a platform for national and international brands under its Nykaa brand.
Of the two principal verticals; Nykaa Vertical offers beauty and personal care products while Nykaa Fashions Vertical offers a platform for apparel and accessories
Nykaa provides a true omnichannel experience by combining proprietary brands, white labelled brands and external brands; both online and offline.
The fresh issue portion will entail the issue of 56 lakh shares which at the upper price band of Rs.1,125 per share, will be worth Rs.630 crore.
The OFS will comprise of 4,19,72,660 shares and at the upper price band of Rs.1,125, the OFS value would be Rs.4,722 crore. Nayar trust will sell 48 lakh shares in OFS.
In a digital marketplace dominated by loss making ventures, Nykaa is a rare profitable online digital marketplace. Nykaa not only reported a net profit for the full year FY21, but also reported a small profit in the Jun-21 quarter. However, the real key to the performance of Nykaa lies in the asset light model, which is evident from the robust asset turnover ratio. The asset turnover ratios has shown a consistently rising trend over the last 3 financial years and staying consistently above the level of 1 also indicates good ROI.
How should investors approach the IPO of FSN E-Commerce Ventures (Nykaa)
It looks like Nykaa was inspired by the 38X oversubscription that the Rs.9,375 crore IPO of Zomato received. While traditional valuation parameters may not be workable, here are some key points for investors to ponder over.
On the financials front, the profit trend and the robust asset turnover will work in favour of Nykaa. Currently, most of the digital plays are heavily loss-making digital plays and are still getting significantly higher valuations in the market.
The product range offered by Nykaa is stunning in its breadth and depth. For example, in beauty and personal care, Nykaa offers 1.97 lakh SKUs (stock keeping units) across 2,476 brands. In apparels and accessories, Nykaa offers 18 lakh SKUs across 1,350 brands.
The issue proceeds will be used for debt repayment, investing in expanding brands, investing in expanding the brick-and-mortar presence and in building warehousers. All these are expected to be value accretive in the long run.
The GMP indicates a 60% premium on the issue price already, although it is an information indicator. It can be disputed that Nykaa offers a good play on the emerging trend of higher-end brand consumption online. It will also be the first true-blue omnichannel experience for investors, so that more than justifies the risk.
Now, its your turn to answer: Is it good to invest in the IPO of Nykaa?
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