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Nykaa IPO GMP, Financials, allotment, and detailed review

Mohit
nykaa ipo

nykaa ipo

Table of Contents

Nykaa IPO introduction

Starting in 2012 with the online space, Nykaa diversified into offline stores in 2015 and has 70+ stores under its operations. The company sells the products of 1200+ brands from all over the globe, 5.5 mn monthly visitors, 72% repeated customers, and processes ~1.3 mn orders per month.

Nykaa plans to raise about $500-700 mn at a valuation of ~$4-5 billion by listing on the Indian stock exchanges.

Why to invest in Nykaa IPO?

1. One of India’s leading lifestyle-focused consumer technology platform

2. Nykaa Fashion & FSN Brands are the preferred destination for luxury and prestige products in India for consumers and brands

3. Resilient, capital-efficient business with a combination of strong growth and profitability

4. Nykaa has generated strong revenue growth in the last 3 years. Its revenues increased from Rs 1,116.3 Crore in FY19 to Rs 2,452.6 Crores in FY21.

5. On September 28, 2021, Nykaa acquired 51% of the outstanding equity shares of Dot & Key Wellness Private Limited (“Dot & Key”) through the subscription and purchase of equity shares

What are the Risk factors in Nykaa IPO?

1. Nykaa may incur a loss primarily due to higher marketing costs for the quarter ended September 30, 2021, as compared to the quarter ended June 30, 2021, as stated by them in the prospectus

2. If Nykaa fails to acquire new consumers or fails to do so in a cost-effective manner, it may not be able to increase revenue or maintain profitability.

3. Nykaa is highly dependent on the growth of the online commerce industry in India

4. Nykaa have incurred losses in the past, which may adversely impact the business and the value of the Equity Shares

5. There are pending litigations against Nykaa, Subsidiaries, and certain Directors.

6. Nykaa has certain contingent liabilities like direct tax and indirect tax disputes which, if they materialize, may adversely affect its results of operations, financial condition, and cash flows.

Financial track record of Nykaa

1. Nykaa’s revenue over the past three years are consistently growing which is a great signal

2. But Nykaa’s profit is not stable and consistent due to high expenses and borrowings

3. Nykaa’s latest June quarter 2021 was profitable as compared to past

Financial Year EndedRevenue (₹ Crores)PAT (₹ Crores)EPS (₹)
March 20191,116.38-24.54-0.59
March 20201,777.85-16.34-0.39
March 20212,452.6461.951.34
Three months ended June 2020291.05-54.507-1.23
Three months ended June 2021821.713.5220.07
NYKAA FINANCIALS

Sources of revenue: Nykaa & FSN Brands

a) Sale of products: Consists of selling owned manufactured goods and trading goods -beauty, hygiene, fashion & accessories.
b) Market Place Services: Consists of rendering support services to sellers in respect of
warehousing, logistics, order fulfillment, call center, payment collection, reverse logistics, etc.
c) Marketing Support Services: Consists of amounts earned from general marketing and promotional services to various brands and sellers.

Indebtedness: As of June 30, 2021, FSN Brands has total outstanding borrowings amounting
to ₹ 2,834.54 million

Indebtedness: As of June 30, 2021, Nykaa Fashion has total outstanding borrowings
amounting to ₹ 500.17 million.

Platforms owned by Nykaa & FSN Brands

Nykaafashion.com, pipabella.com, and twentydresses.com,

FSN Brands is primarily engaged in the offline retail store businesses. It does not own any platform.

Nykaa IPO issue objetive

Requirement of funds:
Nykaa Fashion proposes to utilize the Net Proceeds towards funding the following objects:

  1. Investment in certain of their Subsidiaries, namely, FSN Brands and / or Nykaa Fashion for funding the set-up of new retail stores;
  2. Capital expenditure to be incurred by the Company and investment in certain of their Subsidiaries, namely, Nykaa E-Retail, Nykaa Fashion and FSN Brands for funding the set-up of new warehouses;
  3. Repayment or prepayment, in full or in part, of certain borrowings availed by the Company and one of our Subsidiaries, namely, Nykaa E-Retail;
  4. Expenditure to acquire and retain customers by enhancing the visibility and awareness of Nykaa brands; and
  5. General corporate purposes.

Nykaa IPO open date

28th October 2021

Nykaa IPO close date

1st November 2021

Nykaa IPO Finalization of Allotment

8th November 2021

Nykaa IPO Initiation of Refunds

9th November 2021

Nykaa IPO Date of Listing

11th November 2021

Nykaa IPO allotment check

Nykaa IPO allotment can be checked on the registrar website Linktime.co.in

Nykaa IPO Price band

Price range1085 – 1125
Minimum order quantity12

Nykaa IPO GMP today

Nykaa IPO GMP showed a high jump today is at a premium of Rs 650 – Rs 675

Is Nykaa IPO price overpriced?

Calculating with its upper price band of Rs 1,125

Now, the EPS (earning per share) for the FY21 is 1.34 so the P.E ratio (price to earnings ratio) comes at 1125/1.34 = 839X

And, the EPS for Q1 FY22 EPS is Rs 0.07 so the P.E ratio comes at 1125/0.07 = 16071x but when we annualize it 16071/4 = 4018x it is the annual P.E they are asking for FY22

So, they are asking P.E between 839x to 4018x which is too much, thus Nykaa IPO is overpriced

My personal view is to avoid this IPO and think for investment only if it shows consistent growth

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Disclaimer: I am not SEBI registered, Kindly do your own research before any decision, my views are for educational purpose only
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