Amid Lock-In Expiry, Citigroup Sells Nykaa Shares Worth INR 306 Cr: Report

Citigroup has reportedly sold beauty ecommerce giant Nykaa’s shares worth INR 306 Cr via a block deal. Nearly 1.76 Cr shares of the startup were sold at an average price of INR 172 per share.

CNBC reported earlier that Citigroup was set to sell shares worth INR 250 Cr via a block deal that would involve an “individual employee seller” and offer a discount of up to 2% on Nykaa’s current market price.

The development comes at a time when the lock-in period for Nykaa’s pre-IPO investors ends on Thursday (November 10) and the stock is facing the risk of more sell-off. Nykaa’s shares fell as much as 7% to INR 166.85 during the early trading hours on Thursday. 

Nykaa’s shares have already been extremely volatile since last month as the uncertainty around the aftermath of its lock-in expiry kept the investors cautious. In fact, its pre-IPO shareholders hold almost 40% of the company’s stock, which are now at risk of sell-off. Some of those key shareholders are Harindarpal Singh Banga with a 6.42% stake, Steadview Capital with a 3.45% stake, among others.

Shares of Nykaa ended Wednesday’s session at INR 1,076.15 on the BSE, down about 5% from its previous close. The shares have started trading at a lower denomination from today, reflecting the adjusted value following Nykaa’s 5:1 bonus share issue.

Currently, the shares are up marginally compared to their last close, trading at INR 180.25 a piece.

While the fears remain, Jefferies in a research note on Nykaa, earlier this week, said that its bonus share issue largely cushions the stocks from severe sell-off pressure.

Though the lock-in expiry day would otherwise have been important, the bonus share issue has complicated the matter as both pre- and post-IPO shareholders would now be able to sell only about 17% of their holding immediately, noted Jefferies.

“This is because bonus shares would likely be credited by November 15, taking off a potential sell-off on the lock-in expiry day. Bonus shares also attract short-term capital gain if held for <12 months,” the brokerage said.

Overall, brokerages are largely positive about Nykaa’s growth trajectory after it declared its Q2 FY23 last week. The startup reported a 344% year-on-year (YoY) jump in its net profit to INR 5.2 Cr, though it remained almost flat sequentially.

Its gross merchandise value (GMV) also rose 45% YoY to INR 2,345.7 Cr, helped by the beauty vertical, while operating revenue stood at INR 1,230.8 Cr during the quarter, registering a 39% YoY growth.