Nykaa IPO Opens Today: Price, GMP, Strength, Valuation, Key Risks; Should you Invest?

Nykaa IPO Opens Today: The much awaited initial public offering (IPO) of FSN E-commerce Ventures, which owns popular beauty and wellness product online marketplace Nykaa, is all set to open on Thursday, October 28. The Rs 5,352-crore public issue will be open for subscribers from October 28 to November 1. The shares in Nykaa IPO will be a mix of fresh stock and an offer for sale. India’s biggest e-tailer of cosmetics, has fixed the price band for the IPO at Rs 1,085-1,125 apiece. At upper price band of Rs 1,125, Nykaa IPO could raise up to Rs 5,352 crore from the issue.

Nykaa IPO: Key Strengths

Nykaa is the largest specialty beauty and personal care (BPC) online platform in India in terms of value of products sold in the financial year 2021. It is one of the fastest growing fashion platforms in India based on gross merchandise value growth. The inventory-led business model for beauty and personal care product, has helped Nykaa to grow as the most prominent and profitable e-tailers in India today. This unique business model has allowed the company to “offer authentication for all its products and ensures availability and efficient distribution,” believed analysts at Motilal Oswal. Apart from vast online presence, it also has 80 physical stores across 40 cities in India. This omnichannel approach has strengthen Nykaa’s robust distribution network and seamless experience for its customers.

Nykaa’s sustainable growth in business has been achieved through company’s founder-led management team with relevant experience and complementary skill sets, the analysts noted.

Nykaa IPO: Strong Financials in FY21

Over the years, Falguni Nayar has built a scaled business with strong growth and profitability. The company posted a net profit of Rs 61.96 crore in FY21 against a net loss of Rs 16.34 crore in FY20. Revenue from the operations grew 38.10 per cent year-on-year to Rs 2,441 crore in FY21, despite Covid-19 pandemic. The firm’s total GMV was Rs 4,045.98 crore, which rose 50.7 per cent over the financial year 2020. The EBITDA margin was recorded at 6.61 per cent in the financial year 2021. “Nykaa’s capital turnover ratio has improved from 3.1 times in the financial year 2019 to 4.2 times in the financial year 2021. The company have focused on capital efficiency and unit economics, while simultaneously building for scale and growth. Company have been able to achieve this scale with only Rs 577.738 crore primary investment into company as of March 31, 2021,” the Hem Securities said in a note.

Nykaa IPO Valuation

“The IPO is being valued at price/sales of 21.0-21.8x FY2021 revenues of Rs 2,441 crore. The company has also posted strong revenue CAGR of 48.2 per cent between FY2019-20 despite the Covid crisis and register a profit in FY2021. While valuations may appear to be expensive on a P/E basis Nykaa is one of the very few profitable unicorns in India and we believe that the company is well positioned to benefit from the exponential growth in the online beauty and fashion retailing business over the next decade,” said Angel One in a note.


Nykaa shares were trading at a premium of Rs 600 in the grey market, according to IPO Watch data. The grey market premium of Nykaa IPO surged 53.33 per cent over the higher end of the issue price of Rs 1,125. On October 27, the shares of Nykaa was trading at Rs 1,725 apiece in the unlisted market. A soaring GMP often indicates a healthy listing of shares on the bourses.

Nykaa IPO Key Risks:

Analysts at Angel One pointed out key concerns of Nykaa IPO for investors. Take a look — a) Fail to acquire new consumers in a cost-effective manner, b) Business depends on the growth of online commerce industry in India & company ability to leverage technology platform, c) Business incurred losses in past which may impact value of equity shares, d) Changing digital or business regulation in India.

Nykaa IPO: Should you Subscribe?

“Nykaa is bringing the issue at price band of Rs 1,085-1,125 per share at EV/Sales multiple of 16x. Nykaa has a large BPC market opportunity growing at 12 per cent per annum by 2025 & fashion opportunity is expected to grow at 18 per cent per annum by 2025. Also company has posted strong growth without a substantial cash burn. The beauty brand has posted profits along with strong improvement in capital turnover ratio from 3.1 times in the financial year 2019 to 4.2 times in the financial year 2021. This shows that company have focused on capital efficiency and unit economics, while simultaneously building for scale and growth. Hence, looking after scale of operations, strong management team, profitable concern & high growth prospects in industry due to large underpenetration, we believe that company has created, an industry itself,” said Hem Securities in a note.

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