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Nykaa IPO Note
IPO
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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