Nykaa Bonus Issue: Shares Jump 19% Despite Lock-In Expiry

SUMMARY

The lock-in period for Nykaa’s pre-IPO investors expired on Thursday; however, it also coincided with the shares going ex-bonus

Norges Bank, Aberdeen Standard Asia Focus, Segantii India Mauritius, Societe Generale, and Morgan Stanley purchased over 23 Mn shares of Nykaa in two days

Some of the pre-IPO investors, including Narotam S Sekhsaria, Mala Gopal Gaonkar, Lighthouse India, and TPG Growth, sold large volumes of shares since the lock-in expiry

Shares of beauty ecommerce startup Nykaa jumped as much as 19% to INR 224.65 during the early trading hours on Friday (November 11) despite apprehensions that the expiry of the lock-in period for pre-IPO investors would lead to a severe downfall.

The lock-in period for the investors expired on Thursday. However, it also coincided with the shares going ex-bonus. Last month, Nykaa announced a 5:1 bonus share issue and its stock price started trading in a lower denomination from Thursday, reflecting the bonus share issue. The bonus shares are likely to be credited to the demat accounts of the shareholders by November 15.

The bonus share issue might have prevented a potential sell-off that Nykaa would have faced after the lock-in expiry. In the absence of the bonus share issue, 319 Mn Nykaa shares were expected to be up for trade.

Meanwhile, Norges Bank, Aberdeen Standard Asia Focus, Segantii India Mauritius, Societe Generale, and Morgan Stanley purchased over 23 Mn shares of Nykaa in bulk and block deals since Thursday.

In a recent research note, brokerage Jefferies said that the end of the lock-in period would have been a big event, but the bonus share issue complicated the matter. Owing to the bonus issue, Nykaa’s pre- and post-IPO shareholders would only be able to sell about 17% of their holding immediately after the lock-in expiry, taking off the risk of a huge sell-off pressure, it added.

Besides, bonus shares also attract short-term capital gain if held for less than 12 months, the brokerage noted, hinting that it might prevent investors from selling their shares.

However, some of the pre-IPO investors of the startup, including Narotam S Sekhsaria, Mala Gopal Gaonkar, Lighthouse India, and TPG Growth, sold large volumes of shares over the last two days.

Sekhsaria exited the company by selling his entire stake of 14.7 Mn shares at INR 173.7 apiece. Lighthouse India also sold its entire stake of 9.6 Mn shares of Nykaa at INR 171.75 per share.

Mala Gopal Gaonkar offloaded 4 Mn shares of Nykaa at an average price of INR 172.04 apiece. As of September 30, Gaonkar held a 2.4% stake or 11.4 Mn shares in the company.

Shares of Nykaa ended 10.7% higher at INR 208 on the BSE on Friday.