Nykaa Shares Hit Record Low At INR 1,130, Trading Close To IPO Issue Price

Shares of FSN E-Commerce, the parent entity of beauty ecommerce platform Nykaa, touched a record low of INR 1,130 on the BSE on Wednesday (October 19), a 56% decline from the stock’s record-high level of INR 2,574 achieved last year in November just after its IPO.

At the current level, Nykaa shares are trading over 43% lower from their stock exchange debut price of INR 2,001 on the BSE. The stock is also trading close to its IPO issue price of INR 1,125.

After a stellar market debut on November 10, 2021, Nykaa shares made a sharp northbound movement. However, the stock saw sharp corrections in the early part of 2022, and has largely remained range-bound since then.

In a recent research note, brokerage ICICI Securities said that Nykaa’s foray into the eB2B space will help it achieve scale but is likely to have lower value creation than its core business. It also raised concern on the startup’s investments in new businesses and their impact on its EBITDA margins.

Maintaining a ‘hold’ rating, ICICI Securities also cut Nykaa’s target price (TP) to INR 1,250 from INR 1,400, which currently implies almost a 10% upside to its current price of INR 1,136.95 on the BSE.

It is pertinent to note that the share lock-in period for Nykaa’s pre-IPO investors will end on November 10 this year and the event could further hurt the share price.

Brokerage JM Financial, which is rather positive about Nykaa’s growth trajectory and long-term stock performance, said that there could be some sell-off risks for the stock.

“Nykaa is certainly a differentiated play but the fact that 12%+ shareholding is sitting on 100x returns might even be a reason enough for these investors to diversify their portfolio that might be overweight Nykaa,” analysts at JM Financial said.

However, the brokerage continues to believe that any short-term dip in the stock price is a great accumulation opportunity for investors looking to build long-term positions in Nykaa. It has a ‘buy’ rating on Nykaa and a TP of INR 1,780, which implies an upside of over 56% to the stock’s current price.

Earlier this month, Nykaa shares gained slightly after the startup’s board approved issuance of bonus shares in a 5:1 ratio. However, the gains did not hold and the shares have been on a losing streak for the last six consecutive sessions. 

Nykaa’s net profit declined 33% sequentially to INR 5 Cr in Q1 FY23. However, it was a 42% increase on a year-on-year (YoY) basis. The startup’s operating revenue stood at INR 1,148.4 Cr in the quarter, registering a 41% rise YoY.