Nykaa IPO subscribed 1.6x on Day 1 on strong retail investor support

Institutional category subscribed 1.4x, retail quota 3.5x while HNI portion was subscribed 60%; issue closes Monday

The initial public offering (IPO) of FSN Ecommerce Ventures, operator of online beauty startup Nykaa, was subscribed 1.6 times on Thursday, the first day of the issue. The 26.5-million share offering has got bids for 41 million shares with institutional investor category getting 1.4 times subscribed and retail quota getting 3.5 times subscribed. High networth individual (HNI) portion was subscribed 60 per cent. Nykaa’s IPO closes on Monday.

On Wednesday, the company allotted shares worth Rs 2,396 crore to 174 anchor investors at the upper price band of Rs 1,125 per share. At the top-end, Nykaa is valued at Rs 53,200 crore ($7 billion).

Blackrock, Capital Group, Fidelity, Government of Singapore, SBI Mutual Fund, HDFC MF, Tiger Global and Nomura are some of the investors who got allotment in the anchor category.

Nykaa’s Rs 5,352-crore IPO is the biggest since that of online delivery firm Zomato, which was quite a hit among investors.

Nykaa had reported net profit of Rs 62 crore for the financial year 2020-21 (FY21) on revenues of Rs 2,440 crore.

Despite low profitability, most brokerages have a bullish view on the company given the high growth potential.

“Nykaa is likely to trade at a huge scarcity premium versus global peers in the online beauty and personal care space (trading at 3 times FY24E EV/sales average). We believe Nykaa could trade at one-year forward EV/sales of about 6-8 times, purely based on its core BPC offering,”Elara Capital said in a note.

In another note, Prabhudas Lilladhar has said, “We believe Nykaa can sustain a CAGR of 35 per cent in sales, 50 per cent in EBIDTA over coming few years with double digit margins. We believe IPO at 12.6 times EV/GMV on FY21 sales and 4.7times EV/GMV on FY24 sales offers long term value.”