TPG Capital To Dump Nykaa Shares Worth INR 1,000 Cr In Bulk Deal

Trouble brews for beauty ecommerce unicorn Nykaa as reports have now emerged that investor TPG Capital is likely to offload INR 1,000 Cr worth of shares in the startup on Friday (November 18).

Sources told CNBC-Awaaz that the block deal is expected to be executed at a discount of up to 0.5% from the current share price. Nykaa shares closed at 0.57% higher at INR 185.55 on the BSE on Thursday. The aforementioned discount would likely peg the lower end of transaction at INR 184.6.

Citigroup is said to be the book runner for the block deal. 

The report comes close on the back of the expiration of the lock-in period for pre-initial public offering (IPO) investors. The deadline which expired on November 10 has triggered the exodus of a number of institutional investors from the company in multiple block deals.

This selloff comes despite a better than expected result from Nykaa. The beauty ecommerce platform reported a net profit of INR 5.2 Cr in the second quarter of the financial year (FY23), against an operating revenue of INR 1,230.8 Cr during the same period. 

While the net profit surged 300% year-on-year (YoY) in Q2 FY23, revenue witnessed a 39% yearly growth during the period under review.

The weak performance on the bourses has largely been attributed to negative market sentiment and the expiration of the lock-in period. Apprehensions of an impending recession and tightening monetary policies have further added fuel to the fire. This has made investors wary of investing in the company that is yet to churn big profit numbers and revenues. 

Institutional Investors Flee 

Interestingly, this is the second major sell off by a TPG subsidiary in the past one week. Earlier, TPG Growth had exited the listed unicorn by selling 1.08 crore shares of Nykaa at an average price of INR 186.40 apiece.

It is not alone. Last week, pre-IPO investor Narotam S Sekhsaria divested shares worth INR 256 Cr while another anchor investor Mala Gopal Gaonkar sold shares totalling INR 69 Cr. 

On Thursday again, Mala Gopal Gaonkar offloaded another 5.75 Cr shares in the startup at an average price of INR 175.48 per share, realising a total value of INR 1,009 Cr. While this took place, Canada Pension Plan Investment Board (CPPIB) also picked up more than 1.70 Cr shares of Nykaa through an open market transaction valued at INR 299 Cr.

On November 15, Segantii India Mauritius sold more than 33.73 Lakh shares of the beauty ecommerce platform at INR 199.34 per share for a total sum of INR 67.24 Cr. 

Another major blow to Nykaa came after Lighthouse India Fund III sold 3 Cr shares of the startup on Wednesday (August 16) for a cumulative total of INR 252.4 Cr in a bulk deal. The same fund had also divested 96.89 Lakh shares of Nykaa for an average price of INR 171.75 per share.

This is in stark contrast with what Nykaa CEO and founder Falguni Nayar said during the startup’s post-earnings analyst call last week. She had said that high net-worth individuals, who were among the company’s first investors, tend to be long-term investors. 

Anticipating the current fallout, Nykaa had even tried to issue bonus shares and ESOPs to assuage the jump investors but the move appears to have fallen flat. Not only has the stock fallen to record lows, the share prices have also failed to stabilise. 

From a record high of INR 2574 on the BSE in November last year, Nykaa stock has tanked by more than 92%. Last month, Nykaa shares fell to the record low of INR 162.91, pointing to the negative sentiment around the stock. 

With billions of dollars of investor wealth wiped off, it looks like pre-IPO investors are also looking to cash out before shares plummet any lower.

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