Nykaa Shares Down 1%, Market Cap At INR 1.02 Lakh Cr

Shares of FSN E-Commerce, the parent company of lifestyle unicorn Nykaa traded on a subdued note today (December 9th, 2021) after witnessing heavy volatility on Wednesday.

Around 3.15 p.m., its shares were trading at INR 2,162 on the BSE, lower by INR 21.30 or 0.98% from the previous close.

Analysts are of the view that INR 2,000 is a support level. Santosh Meena, head of research, Swastika Investmart said that the shares are expected to trade in the range of INR 2,000-INR 2,500 in the near term.

“The outlook is positive given that it is among the few profit making new age companies,” he said.

On Wednesday (December 8th, 2021), the 30 day lock-in period for the anchor investors ended leading to heavy volatility in the share prices. After a gap-down opening, and gliding through negative and positive territories throughout the session, shares of Nykaa on the BSE ended 1.43% higher at INR 2,183.30 per share.

The end of the lock-in period is generally expected to result in the decline of share prices as anchor investors tend to sell their shares to book profits.

Amit Pamnani, chief investment officer & DGM for investment banking at Swastika Investmart said, “There is no clear trend about the performance of stocks in the long term after the end of the lock-in period but we generally see selling pressure near the end of the 30-days lock-in period or on the first day of trade after the lock-in period is over.”

He added that the intra-day low hit on the first day of trade after the lock-in period may act as a strong support for a further rally for quality stocks. 

Since its bumper listing on November 10th, 2021, the shares of Nykaa have been on a roller coaster ride, hitting an all-time high of INR 2,574 and a low of INR 1,994.10 during this period.

However, its share prices have been under pressure of late and have declined nearly 11.5% in the past five trading days.

Nykaa’s Q2 Financials

Days after its stellar listing, Nykaa reported a 95.4% fall in its consolidated net profit for the July-September quarter.

The beauty and lifestyle marketplace reported a net profit of INR 1.22 Cr during July-September 2021. During the same period of the last fiscal, the beauty and lifestyle unicorn had reported a net profit of INR 26.9 Cr. 

The fall in profits came largely on the back of a 55.36% increase in its expenses to INR 889.09 Cr during Q2FY22, compared to the corresponding quarter of last fiscal. Its expenses stood at INR 572.26 Cr during the same quarter of 2020. 

The revenue from operations, rose 46.62% year-on-year to INR 885.26 Cr during the period under review compared to INR 603.77 Cr in the same quarter of last financial year. The company’s total income during July-September stood at INR 890.46 Cr, 47.2% higher than INR 604.89 Cr reported during the last fiscal.

Lock-In Norms

According to SEBI norms, an anchor investor, who is a qualified institutional buyer, cannot trade their shares till 30 days after the listing so that individual retail investors do not suffer.

The securities market regulator last month proposed a 90-day lock-in for anchor investors.

It said that the Primary Market Advisory Committee (PMAC) was of the view that instead of increasing the lock-in period for all anchor investors from 30 days, half of the anchor book should be given to those anchor investors who agree to the 90 days or a longer lock-in period.

“It is felt that a longer lock-in for Anchor Investors will provide more confidence to other investors. Therefore, there may be a need to review the period of lock-in for anchor investors,” SEBI said in a report on November 16.