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Nykaa IPO - 7 Things to know before applying for IPO

Nykaa IPO - 7 Things to know before applying for IPO
by 5paisa Research Team 21/10/2021

FSN Ecommerce Ventures Ltd, the company that owns and operates the Nykaa brand, has announced the dates for its proposed IPO.

Here are 7 things you need to know about the Nykaa IPO

✔️   The Nykaa IPO will open for subscription on 28-Oct and close for subscription on 01-Nov. The basis of allotment is expected to be done by 08-Nov while shares are expected to be credited to the demat accounts of allottees by 10-Nov. Nykaa IPO is slated to list on 11th November.

Check : Nykaa IPO Note

✔️    The IPO will be a mix of fresh issue and an OFS. The fresh issue will be worth Rs.630 crore while the OFS will be for a total of 419.73 lakh shares. While the price band is yet to be announced, the market is expecting a price band of Rs.1100 – Rs.1,125. That would peg the OFS at the upper end at around Rs.4,720 crore and the overall size of the IPO at approximately Rs.5,350 crore. This is a market estimate.

✔️    Nykaa was promoted by former Kotak investing banking head honcho, Falguni Nayar. The promoter and the family trusts will also participate in the OFS, but will continue to remain majority shareholders post the IPO. Nykaa offers a digital platform to sell beauty and fashion care products as well as apparel and accessories of marquee brands.

✔️    Nykaa is broadly structured under 2 verticals viz. Nykaa and Nykaa Fashion. The Nykaa vertical comprises the beauty and personal care products and has close to 1.98 lakh SKUs (stock keeping units) from across 2,476 brands. The Nykaa fashion vertical sells apparel and accessories and has 1.8 million SKUs across 1,350 brands.

✔️    The IPO proceeds will be used to invest in subsidiary, FSN Brands, as well as to set up new retail stores. It will also allocate part of the fresh proceeds towards setting up new warehouses. The biggest allocation will include Rs.156 crore for repayment of loans and Rs.234 crore towards investing in building brand visibility and brand awareness.

✔️    Nykaa prides itself in being the rare profit making digital play. For FY21, Nykaa made net profits of Rs.62 crore on revenues of Rs.2,453 crore. For the Jun-21 quarter, Nykaa reported net profits of Rs.3.52 crore on revenues of Rs.822 crore.

✔️    Nykaa, in a nutshell, intends to offer the perfect omnichannel experience. It will offer online and offline sales. It will also offer proprietary and external brands. It will offer pull and push experience for customers.
Nykaa is the biggest digital IPO after Zomato IPO and will test the institutional and retail appetite. QIBs have 75% allocation in the IPO with retail having just 10%.

 

Nykaa IPO - Details Explained

 

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Also Read:-

Upcoming IPOs in 2021

List of Upcoming IPOs in October 2021

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PayTm may Scrap pre-IPO placement

PayTm may Scrap pre-IPO placement
by 5paisa Research Team 22/10/2021

Ahead of its mega IPO, Paytm plans to scrap its Rs.2,000 crore pre-IPO placement exercise as it was unable to agree with investors on pricing and valuations. Paytm is slated to hit the market with an IPO of Rs.16,600 crore which would include a fresh issue of Rs.8,300 crore and an offer for sale of Rs.8,300 crore. It is slated to be the largest issue in Indian IPO history.

The differences over valuation became apparent after Paytm and the investment bankers started talking to potential global investors and domestic institutions. Paytm is apparently seeking a valuation of over $20 billion but the market consensus appears to be closer to $17-18 billion. The last round of funding done by Paytm was at a valuation of $16 billion.

Paytm is into digital money, online market place, UPI transfers, wallets and also Paytm money activity. However, it has seen the pressure of competition from Amazon and Flipkart. Both have deep pockets since Flipkart is now owned by the US based Wal-Mart Inc. The pre-IPO placement of Rs.2,000 crore would proportionately reduce the IPO amount.

As of now, SEBI is yet to approve the DRHP filed by Paytm but that is expected to come in over the next few days. Paytm currently has two choices in front of them. It can either opt for a pre-IPO placement at a lower valuation or it can scrap the pre-IPO placement altogether. Currently, Paytm is open to both options and is awaiting SEBI approval for DRHP.

Ahead of large IPOs, companies do two types of share sales. There is the pre-IPO placement which is done much ahead of the IPO and can be at a discount but comes with a longer lock-in period. They can also do an anchor placement just ahead of the IPO, which has to be at the same price as the IPO price but has a lock-in period of just 1 month.

The success of the Zomato IPO, which got subscribed 38 times despite its size of Rs.9,375 crore has enthused digital plays to use the India route. The next few weeks will see mega digital IPO like Paytm, Nykaa, Policybazaar and MobiKwik among others. It would be the real acid test of the institutional and retail appetite for loss making digital IPOs.

Also Read:-

List of Upcoming IPOs in 2021

List of Upcoming IPOs in October 2021

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Tata Chemicals to Hive off US Soda ash Business

Tata Chemicals to Hive off US Soda ash Business
by 5paisa Research Team 22/10/2021

Tata Chemicals, one of the largest soda ash manufacturers in the world, is planning to hive off its US soda ash unit. While the likely valuations are not yet confirmed, the markets are estimating a valuation of around $1 billion expected by Tata Chemicals. That would be roughly 30% of the current market cap of Tata Chemicals, which stands at $3.50 billion.

Tata Chemicals is open to going with PE funds or with strategic partners to sell the stake. In the last few months, there have been a number of big deals in the global soda ash market with big names including Solvay of Belgium looking to hive off soda ash business. However, Tata Chemicals has refused to confirm as to whether it is even considering the sale.

Soda Ash is derived from the mineral called Trona. Trona is a sodium carbonate compound that is processed into soda ash or into bicarbonate of soda. The state of Wyoming in the United States has the largest reserves of Trona in the world and it is estimated to have Trona reserves to the tune of nearly 127 billion tonnes.

Tata Chemicals is among the largest producers of soda ash in the world with a capacity of 5.5 million tonnes per annum (MTPA). Tata Chemicals relies heavily for its supplies of Trona on the Wyoming mines in the United States and the Lake Magadi mines based in the African nation of Kenya.

One of the reasons Tata Chemicals is looking to sell the US soda ash unit is the sharp fall in demand in the US. North American output fell 18% in the last 12 months for Tata Chemicals and that was mainly driven by demand compression in the aftermath of the COVID 19 pandemic. Its US sales fell from $479 million to $388 million.

Soda ash finds extensive use in detergents, pharmaceuticals, glass, paper and also in water treatment. Tata Chemicals has been gradually restructuring its product lines. Two years back, it hived off its salt manufacturing unit to Tata Consumer Products since it was more of an FMCG product. Tata Chemicals may focus more on the high growth Indian markets.

Also Read:- Sector Update: Chemicals

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Reliance Industries Q2 results

Reliance Industries Q2 results
by 5paisa Research Team 23/10/2021

India’s largest and most valuable continued to surprise the street on the positive side. For the second quarter ending Sep-21, Reliance Industries reported 49.84% growth in total revenues at Rs.174,104 crore. For the Sep-21 quarter, the bottom line net profits were up 43% on a YoY basis at Rs.13,680 crore. This is the highest PAT achieved by RIL in a quarter.
 

Reliance Industries Q2 results
 

Rs in Crore

Sep-21

Sep-20

YoY

Jun-21

QOQ

Total Income (Rs cr)

₹ 1,74,104

₹ 1,16,195

49.84%

₹ 1,44,372

20.59%

Operating Profit (Rs cr)

₹ 18,790

₹ 12,319

52.53%

₹ 16,485

13.98%

Net Profit (Rs cr)

₹ 13,680

₹ 9,567

42.99%

₹ 12,273

11.46%

Diluted EPS (Rs)

₹ 20.60

₹ 14.68

 

₹ 18.63

 

OPM

10.79%

10.60%

 

11.42%

 

Net Margins

7.86%

8.23%

 

8.50%

 


A better way would be to look at the numbers on a sequential basis, i.e. compared to the previous Jun-21 quarter. Compared to Jun-21, the revenues were higher by 20.59% compared to Rs.144,372 crore reported by Reliance Industries in the Jun-21 quarter. The robust YoY growth in the Oil to chemicals (O2C) business was on the strength of robust Brent Crude prices at above $85/bbl and above median gross refining margins or GRMs.

Check - Crude Oil at $83/bbl – Gainers & Losers

Let us now look at the break-up of the overall revenues. The largest O2C business of Reliance saw YoY growth of 58% at Rs.120,475 crore. The retail segment (consisting of the brick & mortar and online retailing of RRVL) saw growth of 10.5% at Rs.45,450 crore. The third big pillar of top line growth, digital business, saw revenues grow by 7.4% at Rs.24,362 crore.
 
Reliance Jio has already emerged as the largest mobile player in India in terms of subscriber numbers. However, ARPU pressures did stifle the top line growth in the quarter. While O2C still contributes the biggest share of revenues, retail and digital combined now contribute 60% of O2C revenues; which is a big deal.

Who contributed most to the EBIT of Reliance. O2C led the sweepstakes in absolute rupee terms, but its EBIT margins of the O2C business is just over 10%. Retail has even lower margins at about 6% on revenues, which is due to the front-ending of investments.

However, the star contributor to EBIT in terms of margins was digital business with EBIT margins of 40%. The EBIT contribution of retail and digital put together is as much as EBIT of O2C business. Interestingly, Reliance also reported 42% boost to cash profits at Rs.23,932 crore. Exports of Reliance in the quarter were up 59% YoY at Rs.59,844 crore.

Average revenue per user (ARPU) of Jio stood at Rs143.60, while data traffic was up 59% at 23 billion GB. EBITDA margins improved from 43.1% to 47%. However, due to the much larger top line base and the pressure of retail profitability, the net margins at 7.86% was lower than both comparable quarters.

Also Read:- 

Reliance Industries Q1 results

Reliance Industries (RIL) Share Price at 52 Week High

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Tech Mahindra and Colgate Palmolive - Q2 Results

Tech Mahindra and Colgate Palmolive - Q2 Results
by 5paisa Research Team 24/10/2021

On 25th October, Tech Mahindra and Colgate Palmolive announced their second quarter results for the Sep-21 quarter. Here is a gist of the quarterly results announcement.

 

Tech Mahindra – Q2 results

Tech Mahindra reported growth of 16.11% in sales for the Sep-21 quarter at Rs.10,881 crore. For the same period, the net profits were higher 25.75% on a YoY basis at Rs.1,339 crore on the strength of solid 17.2% growth in EBITDA and sustaining EBITDA margins at around 18.35. Tech Mahindra grew its active client base to 1,123 clients in Sep-21 quarter compared to just 988 clients in Sep-20 quarter. Revenues from the Americas grew 14.9% while the revenues from Europe grew at a more robust 19.9%. The share of the offshore business increased from 37% to 39%; but still lower than the peer group.
 

Tech Mahindra – Q2 Results

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 10,881

₹ 9,372

16.11%

₹ 10,198

6.70%

Operating Profit (Rs cr)

₹ 1,652

₹ 1,331

24.10%

₹ 1,545

6.92%

Net Profit (Rs cr)

₹ 1,339

₹ 1,065

25.75%

₹ 1,353

-1.07%

Diluted EPS (Rs)

₹ 15.14

₹ 12.11

 

₹ 15.32

 

OPM

15.18%

14.21%

 

15.15%

 

Net Margins

12.30%

11.36%

 

13.27%

 

 

As can be seen from the above table, the 24.1% spurt in operating profits to Rs.1,652 crore was triggered by the 17.2% growth in EBITDA at Rs.1,995 crore. The EBITDA margins at 18.3% have been stable but far lower than the peer group. Tech Mahindra reported OPM of 15.18% for the quarter. The company has also proposed a special dividend of 300% or Rs.15 per share on the par value of Rs.5. 

In terms of business verticals, Tech Mahindra saw growth across CME (communication, media, entertainment), manufacturing, technology and BFSI verticals in the range of 17-18% on an average. One cause for worry is that the attrition rate went up from 14% to 21% YoY. The company closed the quarter with NPM of 12.3%.

 

Colgate Palmolive – Q2 results

Colgate Palmolive reported 5.21% growth in total revenues for the Sep-21 quarter at Rs.1,352.42 crore. However, the net profits were marginally lower by -1.83% YoY at Rs.269.17 crore. Although the sales growth was just a tad above 5%, it managed to sustain growth momentum across brands, with strong penetration in oral care. 
 

Colgate Palmolive – Q2 Results

Rs in Crore

Sep-21

Sep-20

YOY

Jun-21

QOQ

Total Income (Rs cr)

₹ 1,352.42

₹ 1,285.48

5.21%

₹ 1,165.97

15.99%

Operating Profit (Rs cr)

₹ 355.87

₹ 363.18

-2.01%

₹ 310.52

14.60%

Net Profit (Rs cr)

₹ 269.17

₹ 274.19

-1.83%

₹ 233.23

15.41%

Diluted EPS (Rs)

₹ 9.90

₹ 10.08

 

₹ 8.58

 

OPM

26.31%

28.25%

 

26.63%

 

Net Margins

19.90%

21.33%

 

20.00%

 

 

For the Sep-21 quarter, the operating profits were lower by -2% at Rs.355.87 crore. Unlike a lot of other consumer goods companies, Colgate was not hit by the raw material cost or fuel spike. Instead, its took a hit on higher inventory costs. As a result, the operating margins at 26.31% in the Sep-21  were a tad lower than 28.25% in the year ago quarter.

In the midst of flat to weak profits, Colgate built on innovations like  toothpaste for diabetics, Vedshakti mouth spray, gentle range of toothbrushes etc. The net profit margins for the Sep-21 quarter at 19.9% was tad lower than 21.33% in Sep-20 quarter. 

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Nykaa IPO - Information Note

Nykaa IPO Note
by 5paisa Research Team 25/10/2021

FSN E-Commerce, the company that owns and operates the Nykaa digital brand, proposes to come out with an IPO of Rs.5,352 crore. The issue opens on 28-October and closes for subscription on 01-November. Nykaa is a digital platform that offers an agnostic market place for beauty products, healthcare products, apparel and accessories. It offers a one-stop shop for a range of brands across a plethora of price points.

FSN E-Commerce Ventures was promoted by Falguni Nayar, the former head of investment banking at Kotak Mahindra Capital. Falguni was also an independent director on the board of Tata Sons. FSN E-Commerce Ventures was floated in 2012 and it has emerged as one of the few profitable digital specialized ecommerce properties in India.

Below are the terms which you should know about Nykaa IPO

Key terms of the IPO issue of FSN E-Commerce Ventures (Nykaa)

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

28-Oct-2021

Face value of share

Rs.1 per share

Issue Closes on

01-Nov-2021

IPO Price Band

Rs.1,085 - Rs.1,125

Basis of Allotment date

08-Nov-2021

Market Lot

12 shares

Refund Initiation date

09-Nov-2021

Retail Investment limit

14 Lots (168 shares)

Credit to Demat

10-Nov-2021

Retail limit - Value

Rs.189,000

IPO Listing date

11-Nov-2021

Fresh Issue Size

Rs.630.00 crore

Pre issue promoter stake

54.22%

Offer for Sale Size

Rs.4,721.92 crore

Post issue promoters

52.56%

Total IPO Size

Rs.5,351.92 crore

Indicative valuation

Rs.53,204 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

75%

Retail Quota

10%

Data Source: IPO Filings
 

Here are some of the key merits of the FSN E-Commerce Ventures (Nykaa) business model

a) Nykaa has a diverse portfolio of beauty, fashion and personal care products

b) It is the only digital profit making ecommerce venture in India

c) Provides a platform for leading national and international brands

d) Nykaa Vertical offers a platform for beauty and personal care products

e) Nykaa Fashions Vertical offers a platform for apparel and accessories

f) Nykaa combines proprietary brands, white labelled brands and external brands


Also Check - Nykaa IPO - 7 Things to know before applying for IPO
 

How is the FSN E-Commerce Ventures (Nykaa) IPO structured?

The IPO will be a combination of a fresh issue and an offer for sale. Here is a gist of the IPO offer of the company.

a) The fresh issue component will entail the issue of 56 lakh shares and at the peak price band of Rs.1,125 per share, the fresh issue amount will be Rs.630 crore. 

b) The OFS component will comprise of the issue of 4,19,72,660 shares and at the peak price band of Rs.1,125, the OFS value would be Rs.4,722 crore resulting in a total IPO issue size of Rs.5,352 crore.

c) The Falguni Nayar family trust will offer 48 lakh shares as part of the OFS and as a result the promoter stake will come down marginally from 54.22% to 52.56%, although they will still retain their majority ownership.

Apart from the promoter group, other early investors including PE funds and family offices will also be participating in the offer for sale. At the upper end of the price band, FSN E-Commerce Ventures (Nykaa) will be valued at Rs.53,204 crore.
 

Financials of Nykaa

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Sales Revenues

Rs.2,452.64 cr

Rs.1,777.85 cr

Rs.1,116.38 cr

Net Profit

Rs.61.95 cr

Rs.-16.34 cr

Rs.-24.54 cr

Total Assets

Rs.1,301.99 cr

Rs.1,124.48 cr

Rs.775.66 cr

Net Profit Margins

2.53%

-0.92%

-2.20%

Asset Turnover (X)

1.88 times

1.58 times

1.44 times

Data Source: Company RHP

One of the selling points for Nykaa has been that they have been among the rare profitable digital ecommerce plays in India. Nykaa has not only reported a profit in FY21 but also in the Jun-21 quarter, albeit small. The bigger advantage for Nykaa is the asset light model, which is evident from the robust asset turnover ratios, which has shown a consistently rising trend over the last 3 financial years.

Investment Perspective for FSN E-Commerce Ventures (Nykaa)

Nykaa will be the biggest digital IPO after Zomato raised Rs.9,375 crore and got a whopping 38 times oversubscription.

Here are some key valuation pointers for Nykaa.

a) The profit trend and the healthy asset turnover ratios will work in favour of Nykaa since loss making digital plays are getting significantly higher valuations in the market.

b) It has a fantastic portfolio of products. In beauty and personal care, Nykaa offers 1.97 lakh SKUs (stock keeping units) across 2,476 brands while in the apparel and accessories segments, it offers 18 lakh SKUs across 1,350 brands.

c) Nykaa is betting on the Omnichannel experience which will combine offline, online, proprietary brands, external brands, pull strategy and push strategy for sales.

d) The fresh issue proceeds will be allocated towards debt repayment, investment in brands, investments in store expansion and in storage warehousers. All these are expected to be value accretive for the stock overall.

While traditional valuation parameters may still not be applicable, its profitable turn and high asset turnover ratios will favour valuations post listing. Nykaa promises to be a good play on the emerging trend of higher-end brand consumption online.

 

Nykaa IPO - details explained

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