Nykaa Slumps Over 5% On BSE To Hit All-Time Low; Most New-Age Tech Stocks Sink

Shares of beauty ecommerce startup Nykaa slumped as much as 5.5% intraday on Tuesday (January 17) to hit a new record low at INR 132.55 on the BSE amid a major correction seen in most other new-age tech stocks today.

Shares of Nykaa fell for the fourth straight session and were trading 4.8% lower at INR 133.55 on the BSE at 2.30 PM IST with 13.8 Lakh shares already being traded, significantly higher than the daily trading volumes. 

A total of 2 Cr Nykaa shares were traded on the BSE and the NSE together, 127% higher than the one-month average trading volume of 88 Lakh.

Market experts said that the stock took a hit due to large volumes of shares being offloaded by major investors. As much as 10.4 Lakh shares changed hands in at least one large trade today, as per Bloomberg data.

While Nykaa continues to witness pressure in 2023 as well after falling over 60% in 2022, brokerage HSBC said that its valuations are now even more “appealing” and under-appreciate the structural growth opportunity in the beauty and personal care space. 

In a research note on Monday, HSBC said, “Nykaa with its leading scale, reach, and broad product range is a rare combination of profitability and sustainable exponential growth, in our view. We expect revenue to double every two to three years over the coming decade.”

The brokerage maintained the ‘buy’ rating on the stock and adjusted its price target (PT) to INR 361.67, reflecting the shares’ lowered denomination post bonus share issue. HSBC’s current PT implies an almost 158% upside to the stock’s last close on Monday.

The brokerage observed that shares of Nykaa have witnessed a large correction, hurt by the global tech sell-off on rising yields and due to its recent lock-in expiry in November last year.

After its lock-in expiry last year, several major pre-IPO shareholders of Nykaa like Lighthouse India Fund III, Kravis Investment Partners, TPG Capital, Narotam S Sekhsaria, Mala Gopal Gaonkar, among others, offloaded crores of shares of the beauty ecommerce giant.

Besides Nykaa, several other new-age tech stocks, including Zomato, Paytm, Delhivery, EaseMyTrip, PB Fintech, and the recently-listed DroneAcharya also fell around 1% to 5%.

Zomato shares hit an intraday low of INR 50.5 on the BSE, trading at levels last seen in August 2022 after its lock-in expiry. Shares of Zomato were trading 3.5% lower at INR 50.9 on the BSE at 2.30 PM IST.

Analysts are of the opinion that inflationary pressure hurt discretionary spending in the third quarter of FY23, and this may adversely affect Zomato’s performance during the quarter.

In its internet preview research note, brokerage JM Financial estimated only around 1% quarter-on-quarter growth in Zomato’s gross order value for the food delivery segment due to the impact of high inflation on discretionary spending, increase in dine-in consumption, and discontinuation of Zomato Pro Plus loyalty programme. 

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