As the conclusion of the lock-in term approaches, Nykaa shares decline below the issue price 2022.
The best-performing tech firm to date, Nykaa, an online marketplace for fashion, is presently trading only a little bit above its first public-providing price. The parent company of Nykaa, FSN E-Commerce Ventures, had its share price decrease as much as 2% on Tuesday, falling below the price of its first public of Rs 1,125 because the expiration of the pre-IPO lock-in draws near.
The stock was down 2.5 percent and trading at Rs 1,115 on the Stock Exchange of India at 2:15 PM. The stock has lost 3% during the past five trading sessions. It has decreased by 12.67 percent over the month.
On November 10, the pre-IPO investors’ lock-in period comes to an end.
According to JM Financial, 31.9 crore shares, or roughly 67 percent, are likely to be available for trading on the expiration day. HNIs, including Sunil Kant Munjal, Narotam Sekhsaria, Harindarpal Singh Banga, Steadview Capital Mauritius LIC, TPG Growth IV SF Pte. Ltd and Lighthouse India Fund III will be allowed to sell their interests.
The shares may decline more if Nykaa follows Zomato’s plan. After 78 percent of Zomato’s shares exited the needed one-year lock-in following its IPO, the company’s shares fell nearly 13% that day to record lows.
Nykaa made a splash on the stock market on November 10, 2021, debuting with a whopping 79 percent premium.
JM Financial continues to be optimistic about the business. According to the brokerage, “Nykaa’s present market price still suggests strong valuations relative to most traditional companies, but that does not take into profile the growth seeds that the company is sowing by investing in the fashion and e-B2B categories.”
With an aim price of Rs. 1,780, it rates the stock as a buy. Hold rated, and Rs 1,250 is the target price for ICICI Securities. “Investments in the curated content, convenience, and differentiated value proposition are paying off. It projects CAGRs (compound annual growth rates) for sales and core profit of 42% and 90%, respectively, across the period of FY22 to FY24. The stock was down 2.66 percent on the NSE at 2:44 PM IST, trading at Rs 1,113.50 per share.
If Nykaa follows Zomato’s lead, its stock price may decline sharply. After 78% of Zomato’s portions were released from the needed one-year safe period following the first public providing on July 25, their portions dropped over 13% to new lows.
On November 10, 2021, Nykaa debuted on the stock market with a staggering 79 percent premium.
According to the rules, pre-IPO investors must obligatedly hold the share for at minimum six months after the IPO. The lock-in term was one year before April 2022. For Zomato and Cartrade, this lock-in boundation has passed its expiration date. Because of their global antipathy to technology and startups, investors are concerned that the end of the lock-in time could lead to a flood of shares in the market.
Nykaa’s Q2 Financials
A few days after announcing a great listing, Nykaa announced a 95.4% decline in its combined net profit for the period of July to September. During the period of July through September 2021, the beauty and lifestyle market achieved a net profit of INR 1.22 Cr. The beauty unicorn had made a net profit of INR 26.9 Cr during the same time of the other fiscal.
The company’s expenditure increased by 55.36% to INR 889.09 Cr for Q2FY22 compared to the same quarter of the other fiscal, which is mostly to blame for the decline in earnings. Its costs were INR 572.26 Cr in the same 2020 quarter.
When compared to the same quarter the other financial year, the operating income increased 46.62% year over year to INR 885.26 Cr. The company’s total revenue for July through September was INR 890.46 Cr, a 47.2% increase over the INR 604.89 Cr is detailed for the other fiscal year.
To protect the people and the retail investors, SEBI regulations provide that an anchor investor, known to be a qualified foreign institutional buyer, is not permitted to exchange their shares until 30 days after the listing. The securities market regulator proposed an anchor investor lock-in of 90 days last month.
It stated that the Primary Market Advisory Committee (PMAC) believed that rather than exceeding the lock-in term for all anchor investors by 30 days, only those who agreed to a 90-day lock-in period or a longer one should receive half of the anchor book.
“It is believed that giving Anchor Investors a more extended lock-in period will provide other investors help. Therefore, it could be necessary to reassess the anchor investor lock-in period, SEBI stated in a report released on November 16.
edited and proofread by nikita sharma