Nykaa IPO Subscription: Nykaa's Rs 5,352 Crore IPO Opens Today, Should You Subscribe?

FSN E-Commerce Ventures, which owns Nykaa and Nykaa Fashion, an online marketplace for beauty and wellness items, raised Rs 2,396 crore from 174 anchor investors ahead of its first public offering. 

Nykaa, founded in 2012, is a leading destination for beauty products

Mumbai: India's biggest e-tailer of cosmetics, Nykaa's initial public offering (IPO), has opened for public subscription today and will close on November 1 with a price range of Rs 1,085- Rs 1,125 a share.

FSN E-Commerce Ventures, which owns Nykaa and Nykaa Fashion, an online marketplace for beauty and wellness items, raised Rs 2,396 crore from 174 anchor investors on Wednesday ahead of its first public offering. 

The Rs 5352 crore IPO includes fresh equity shares totaling 630 crores and an offer for sale (OFS) of 41,972,660 equity shares by approved issuers.

Nykaa shares are currently available in the grey market for a hefty premium (GMP) of Rs 625, according to market experts. On November 11, the company's shares will be listed on the NSE and BSE, two major stock markets.

Key strengths

Nykaa, founded in 2012 by former investment banker Falguni Nayar, had 55.8 million downloads across all mobile applications as of August 31, 2021. Nykaa started their first physical store in 2014, and as of August 31, 2021, they have 80 physical outlets in 40 cities.

The company offers a varied range of beauty, personal care, fashion products, and its own line of products. Nykaa is divided into two business verticals: Nykaa (beauty and personal care items) and Nykaa Fashion (fashion) (apparel and accessories). 

Across two business verticals, it has offered about 3.1 million SKUs (stock-keeping units) from 4,078 national and international companies to its customers.

Key Financials

Nykaa is one of the country's few lucrative online merchants. In FY21, it made a net profit of Rs 62 crore, compared to a net loss of Rs 16 crore the previous year. In FY21, total income increased by 38% year on year to Rs 2,441 crore.

FSN creates its own beauty and personal care products through third-party manufacturers in the beauty and personal care vertical. Nykaa Cosmetics, Nykaa Naturals, and Kay Beauty are some of the brands that sell them.

Should you subscribe?

Nykaa shares are currently available in the grey market for a hefty premium (GMP) of Rs 625, according to market experts. The IPO has got thumbs up from the analyst community, who believe that Nykaa is likely to get a 'scarcity premium' compared to its global peers. The valuations, according to analysts, are attractive against recently listed unicorns CarTrade and Zomato. Nykaa's valuation at the upper price band comes out to be 809.3 times its price to earnings. Leading brokerages like Anand Rathi Securities, Elara Capital, Hem Securities, K R Choksey, Motilal Oswal, Prabhudas Lilladhar, Reliance Securities, and Religare Securities are bullish on the IPO.