All eyes are set on Nykaa, India?s biggest online marketplace for beauty, personal care products listing on Wednesday. Nykaa operator FSN E-Commerce Ventures will be listed on both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) at 10 am on November 10. Nykaa initial public offering (IPO) received stellar responses from investors when it had opened for subscription. Nykaa IPO was subscribed 81.78 times over the 2.64 crore shares that were on offer. Investors put bids of over 216.59 crore shares against the total issue size of over 2.64 crore shares, according to the data. The strong response from the investors, the inventory-led business model, vast online presence along with 80 physical stores across 40 cities in India and high premium in the unofficial market ahead of the listing indicate a health listing for Nykaa IPO on the bourse on November 10, according to experts.
Nykaa IPO opened for subscription during October 28 to November 1 and fixed a price band of Rs 1,085-1,125 apiece for the maiden offer. Nykaa IPO comprises a fresh issue worth Rs 630 crore and an offer for sale of up to 4,18,72,660 shares worth Rs 4,721.92 crore. The company will use the net proceeds from the fresh issue to invest in two subsidiaries and for establishing new retail stores. The company will also utilise the money towards repayment or prepayment, of outstanding borrowings availed by the company and one of their subsidiaries, namely, Nykaa E-Retail, according to the draft paper.
Nykaa IPO received overwhelming response from the investors during bidding, thanks to unique business model and founder-led management team and a healthy market share in the beauty and personal care segment. The portion reserved for the qualified institutional buyers (QIBs) was subscribed 91.18 times. The quota allocated for institutional investors was subscribed a whopping 112.02 times and that of retail individual investors was booked 12.24 times.
Nykaa IPO Grey Market Premium
The unlisted shares of Nykaa has been fetching a healthy premium in the grey market in the last few days. Nykaa shares were trading at a price of Rs 2,575 in the grey market on Novemeber 9. Ahead of the listing, Nykaa IPO grey market premium was Rs 750, 67 per cent over the final IPO price of Rs 1,125 per share, according to those deal with unlisted market.
Nykaa IPO Listing on BSE, NSE on November 10
On Nykaa?s listing on BSE and NSE on November 10, Abhay Doshi, founder, UnlistedArena.com, dealing in pre-IPO and unlisted shares, said, As the primary market is allured with the spree of startup IPOs, Nykaa which is the only profitable startup among current startup IPOs succeeded in getting amazing response from the investors. I expect Nykaa to list anywhere above Rs 1,700, implying over more than 50 per cent gains on listing.?
On Nykaa?s valuation, Reliance Securities said in a note, ?The IPO is valued at 21.8x FY21 EV to sales, which is at 20 per cent discount compared to the other two recently-listed unicorns, CarTrade and Zomato, despite generating superior RoE. In our view, the beauty and personal care market has a large addressable market opportunity, especially in India where millennials tend to prefer buying brands and look for easy buying options such as e-commerce. Being into an unique business model and first-mover advantage, NYKAA is likely to get a healthy traction ahead and thus the high earnings valuation would not be the right criteria to judge the stock.?
For in investors, it mentioned, ?However, progress of future earnings growth and cash flow generation would be key things to watch out for. Further, considering the asset light business model of the company and sustained traction in GMVs, we believe the return ratio profile is likely to emerge stronger, going forward. Hence, we recommend subscribe for a Long-Term perspective.?
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