As Lock-In Period Nears End, Nykaa Shareholders Okay Issuance Of Bonus Shares, ESOPs

Beauty ecommerce platform Nykaa has received approval from shareholders for the issuance of bonus shares, the new ESOP and the stock unit plan.

“The Company believes that Bonus Shares will encourage the participation of retail investors in the long term, as well as see a wider shareholding,” said Nykaa in a statement. 

While 100% of the shareholders voted in favour of bonus shares, 92% and 94% of the stockholders voted in for implementation of the ESOPs and the stock unit plan, respectively. 

“The board on October 3, 2022, approved bonus issue of equity shares in the proportion of five fully paid-up equity shares for every one fully paid-up equity share each held by the shareholders of the company…The company received an overwhelming response from its shareholders and witnessed 100% of the voting in favour of the bonus resolution,” said Nykaa.

Bonus shares are additional shares issued by a company on the basis of the existing shares held by a shareholder. 

Another major highlight was the ratification given to the new ESOP 2022 scheme, which the listed unicorn said was aimed at ‘attracting and retaining’ the right talent pool and building long-term incentive structures.

The nod comes a month after it was reported that the board of Nykaa had approved the formulation and implementation of the ESOP 2022 scheme and the stock unit plan.

Under ESOP 2022, the startup will grant a maximum of 16 Lakh options to eligible employees of the startup, including its subsidiaries and associate companies. The exercise period for ESOPs could be extended to a maximum of one year. 

Additionally, the value of the ESOP will carry a 20% discount on either the market price mentioned during the grant or 15-day’ closing average before the day of the grant.

On similar lines, Nykaa will also issue a maximum of 4 Lakh units under the Stock Unit Plan, 2022. Under this, employees will be allowed to exercise their stock units within 90 days of the issue at face value of shares of Nykaa as on the grant date.

This is the third round of ESOPs issued by the beauty ecommerce platform, the first one being in 2012 and the second being in 2017. In the immediate aftermath of the ESOP announcement last month, Nykaa’s shares had rallied more than 10%. 

The Nov 10 Fear Looms 

The slew of announcements comes ahead of the November 10 expiration of the lock-in period for pre-IPO shareholders. The bonus shares and stock options could likely be attributed to Nykaa leadership’s way of minimising damage ahead of the deadline. It could also be seen as a way for investors to stick to the stock as negative market sentiment pummel Nykaa on the bourses.

A similar story played out in July after Zomato’s shares fell to a record low. This was triggered by pre-IPO shareholders who sold the stock to cover their losses.

A week ago, Nykaa shares recorded an all-time low of INR 975 on the NSE as adverse market conditions and the ensuing selloff sent the stock on a downward spiral. Founded in 2012, Nykaa went public in late 2021. Its shares listed at INR 2,018 on the NSE on November 10, 2021, a hefty premium of nearly 80% over its issue price of INR 1,125 apiece. In essence, the market rout has wiped off 52% of the investor wealth between its all-time low and its listing price. 

Competing with the likes of Purplle, Plum, and MyGlam in the $5.6 Bn beauty market, Nykaa has lately been working to consolidate its position as a ‘house of beauty brands’, acquiring content to commerce platform Little Black Book and D2C wellness and lifestyle brands Earth Rhythm, Kica, and Nudge Wellness.

The strategy has somewhat played well as Nykaa posted a 344% year-on-year (YoY) jump in its net profit to INR 5.2 Cr during Q2 FY23. The beauty major also reported a 39% YoY growth in operating revenue to INR 1,230.8 Cr in Q2 FY23 and a 45% yearly increase in gross merchandise value (GMV) to INR 2,345.7 Cr duringJuly-September quarter of the fiscal year.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.