Nykaa (FSN e-Commerce Ventures) IPO Review – Is it good or bad for investment?
Nykaa IPO (FSN e-Commerce Ventures IPO) Details
Mumbai based FSN e-Commerce Ventures (Nykaa) is coming up with IPO that would open for subscription on 28th October 2021. FSN E-Commerce Ventures Limited (Nykaa) is a consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. Company has generated strong revenue growth in the last 3 years. It turned from loss making to profit making in FY2021. Should you invest in Nykaa (FSN e-Commerce Ventures) IPO? What are the risk factors in this IPO? Let me do IPO review and indicate whether investors should buy or not.
About Nykaa Limited
Company is a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. Since its incorporation in 2012, they have invested both capital and creative energy towards designing a differentiated journey of brand discovery for its consumers.
They have a diverse portfolio of beauty, personal care and fashion products, including its owned brand products manufactured by company. As a result, they have established itself not only as a lifestyle retail platform, but also as a consumer brand. They offer consumers an Omnichannel experience with an endeavor to cater to the consumers’ preferences and convenience:
1) Online: Its online channels include mobile applications, websites and mobile sites. As of August 31, 2021, they had cumulative downloads of 55.8 million across all its mobile applications and during the five months ended August 31, 2021, 88.2% of its online GMV came through its mobile applications. According to the RedSeer Report, they have one of the highest share of mobile application-led transactions, among the leading online retail platforms in India during Financial Year 2021 and the five months ended August 31, 2021.
2) Offline: Its offline channel comprises of 80 physical stores across 40 cities in India over three different store formats as of August 31, 2021. Its physical stores offer a select offering of products as well as a seamless experience across the physical and digital worlds.
Its lifestyle portfolio spans across beauty, personal care and fashion products. They believe that consumers have different journeys for different lifestyle needs, and this has led them to build business vertical-specific mobile applications, websites and physical stores. These independent channels allow them to tailor their content and curation optimally for the convenience of consumers and to cater to the different consumer journeys that exist in these business verticals:
Nykaa: Beauty and personal care
Nykaa Fashion: Apparel and accessories
Nykaa (FSN e-Commerce Ventures) IPO details
|IPO Opening Date||28-Oct-21|
|IPO Closing Date||01-Nov-21|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 1 per equity share|
|IPO Price band||Rs 1085 to Rs 1125 per equity share|
|Lot Size||12 Shares|
|Min Order Quantity||12 Shares|
|Listing at||BSE and NSE|
|Issue Size||Total Size: Rs 5,351.92 Crores
Fresh issue: Rs 630 Crores
OFS: Rs 4,721.92
|Book Running Lead Managers||BofA Securities, Citigroup Global Markets India, ICICI Securities, JM Financial Consultants, Kotak Mahindra Capital and Morgan Stanley India|
What is Nykaa competitive strengths?
1) It is one of India’s leading specialty beauty and personal care companies.
2) Major brands offering their products on Nykaa’s platform for sale.
3) Capital efficient business with strong growth and profitability.
4) Company’s advanced technology platform.
5) Founder-led company with an experienced management team.
What are the Objects of the Offer?
Here are the objects of the IPO offer.
1) Offer for Sale (OFS) Rs 4,721.9 Crores: Nykaa (FSN e-Commerce Ventures) IPO Size is Rs 5,351.9 Crores and it contains OFS and fresh issue. Under OFS selling shareholders would sell the shares and company would not get any proceeds from the issue.
2) Fresh issue Rs 630 Crores: Company would use fresh proceeds for the following:
i) Investment of Rs 42 Crores in certain of their subsidiaries, namely, FSN Brands and / or Nykaa Fashion for funding the set-up of new retail stores;
ii) Rs 42 Crores towards 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;
iii) Rs 156 million towards repayment or prepayment, of outstanding borrowings availed by the company and one of their subsidiaries, namely, Nykaa E-Retail;
iv) Expenditure of Rs 234 Crores to acquire and retain customers by enhancing the visibility and awareness of the brands; and
v) General corporate purposes.
Who is the promoter of FSN e-Commerce Ventures Limited?
Falguni Nayar, Sanjay Nayar, Falguni Nayar Family Trust And Sanjay Nayar Family Trust are the company promoters.
How is the company financial track record?
Here are the total assets, revenues and profits of the company in the last 3 years.
|Financial Year ending / Period ending (Amt in Mns)|
|Particulars||FY19||FY20||FY21||Qtr ending 30-Jun-21|
|Profit After Tax||-245.4||-163.4||619.5||35.2|
Why to invest in Nykaa (FSN e-Commerce Ventures) IPO?
Here are the positive factors in this company.
1) Nykaa is one of the India’s leading specialty beauty and personal care companies. Major brands offer their products on Nykaa’s platform for sale.
2) Company 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.
3) Company turned from loss making to profit making in FY2021. It has incurred loss of Rs 24.5 Crores in FY19 Vs profit of Rs 61.9 Crores in FY21.
Risk Factors in Nykaa (FSN e-Commerce Ventures) IPO
1) If they are unable to manage their growth or execute strategies effectively, its business plan and expansion may not be successful, and its business and prospects may be adversely affected.
2) If they fail to acquire new consumers or fail to do so in a cost-effective manner, they may not be able to increase revenue or maintain profitability.
3) Its business depends on the growth of online commerce industry in India and its ability to effectively respond to changing user behavior on digital platforms.
4) There are pending litigations against the Company, Subsidiaries, and certain of its directors. Any adverse decision in such proceedings may render them or them liable to liabilities and penalties and may adversely affect its business, results of operations, cash flows and reputation.
5) Its business depends upon the user behavior and continued acceptance of digital platforms.
6) Changing regulations in India could lead to new compliance requirements that are uncertain.
7) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.
Nykaa (FSN e-Commerce Ventures) IPO dates for subscription, Allotment and Listing
|Finalization of Allotment||08-Nov-21|
|Initiation of Refunds||09-Nov-21|
|Credit to Demat Account||10-Nov-21|
|IPO Shares Listing Date||11-Nov-21|
Is Nykaa (FSN e-Commerce Ventures) IPO Price is underpriced or overpriced?
Nykaa share price band is Rs 1,085 to Rs 1,125 per share.
1) On the upper price band of Rs 1,125 and last 3 years average EPS of Rs 0.44, the P/E ratio works out 2,556x.
2) If we take FY21 EPS of Rs 1.34, the P/E ratio works out to 839x.
3) If we take Q1 FY22 EPS of Rs 0.07 and annualize for FY22, the P/E works out to be 4,017x.
4) Means company is asking IPO price in the P/E range of 839x to 4,017x.
3) There are no listed peers who are doing similar business. However, at this P/E ratio, it is very highly priced.
What is Nykaa (FSN e-Commerce Ventures) IPO Grey Market Premium?
GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about IPO price as it is unorganized market.
Currently Nykaa (FSN e-Commerce Ventures) IPO GMP is not available as there are no trading’s happening as of the day of writing the article.
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Nykaa Limited IPO – Review and Conclusion
Is it good or bad to invest in Nykaa (FSN e-Commerce Ventures) IPO?
Nykaa is the leading specialty and personal care companies in India. Major brands are offering their products on their platform for sale.
Company’s revenues have grown significantly in the last 3 years. Company has turned from loss making to profit making in FY21.
There are two major negative or risk factors in this IPO. One is that company IPO price is very highly priced. Second is that while it turned to profit making company in FY21 and generated 2.5% margins on its revenues, the margins for Q1 FY22 (Apr to Jun Quarter) has declined to 0.4%. This indicates that FY21 margins are not sustained. Investors should not carry away that such profits would continue in future (which is a classic example).
Considering all these factors, investors should avoid such IPOs which are riskier for investment.
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