Nykaa to turn ex-date on Thursday for 5:1 bonus issue; stock sheds 4%

Shares of FSN E-Commerce Ventures (Nykaa) slipped 4 per cent to Rs 1,091 on the BSE in Wednesday’s intra-day ahead of the record date for its 5:1 bonus share issue i.e. five bonus shares for every one share held in the company.

The board of the company has fixed Friday, November 11, 2022 as the ‘Record Date’ for the purpose of determining the members eligible for bonus equity shares. The stock will turn ex-date for bonus shares on Thursday, November 10, 2022.

FSN E-Commerce Ventures, more commonly known as Nykaa, is a consumer technology platform, delivering a content-led, lifestyle retail experience to consumers through its diverse portfolio of beauty, personal care & fashion products including their own brand products.

At 01:58 pm; Nykaa was trading 3 per cent lower at Rs 1,097.40, as compared to a 0.05 per cent decline in the S&P BSE Sensex. In the past one month, Nykaa has underperformed the market with its stock price having declined 14 per cent as compared to a 5 per cent rise in the benchmark index.

The stock had hit an all-time low of Rs 975.50 on October 28, 2022. It touched a record high level of Rs 2,574, which it had touched on November 26, 2021. The company made its stock market debut on November 10, 2021.

Meanwhile, Nykaa has managed to improve its profitability parameters during the quarter ended September 2022 (Q2FY23). The company’s net profit was up nearly 330 per cent year-on-year (YoY). While margin performance was driven by growth in revenue, the company is also making structural changes that allow it to control cost better.

HSBC Global Research has a ‘buy’ call on the company’s stock, which has a structural attractiveness supported by a strong Q2 performance. “With its leading scale, reach, and broad product range, Nykaa is a rare combination of profitability and sustainable exponential growth in our view. We expect revenue to double every two to three years in the coming decade,” the brokerage said in a report. CLICK HERE FOR FULL REPORT

According to analysts at HDFC Securities, Nykaa has the potential to be a hybrid, but as of now (85 per cent of net sales value (NSV) - inventory-led), it shares more characteristics with a busy, efficient, linear online pipeline than a platform. Additionally, Nykaa’s total address market (TAM) seems to be oversold as well. Hence, valuation stencils must be realigned accordingly.

The brokerage said in its initial coverage report said Nykaa is an efficient online business; its success in part is due to the absence of potent competitors (this is gradually changing). Ex-ad income, lack of non-linear monetization levers forces us to realign our valuation compass somewhere between a linear business and a pure platform, it added.