Nykaa IPO: What GMP Indicates on Last Day of Subscription

IPO involves fresh issue of equity shares ₹630 crore and offer for sale (OFS) of 41,972,660 equity shares by the promoter and existing shareholders.

According to market observers, Nykaa shares are available at a slipping premium (GMP) since the previous day, but remain strong. ₹570 in gray market today. The company’s shares are expected to be listed on the major stock exchanges NSE and BSE on November 11.

“Given the scale of operations, strong management team, profitable concern and high growth potential in the industry, we believe that the company has created an industry by itself. Hence, we recommend to “subscribe” for longer term along with listing gains,” suggested Hem Securities.

Founded in 2012 by former investment banker Falguni Nair, as of August 31, 2021, Nykaa had a cumulative download of 55.8 million across all mobile applications. Nykaa had made a net profit of ₹61.9 crore in FY 2011 as compared to loss ₹16.3 crore in FY20. Nykaa opened its first physical store in 2014, and as of August 31, 2021, it has 80 physical stores in 40 cities.

The company plans to use the proceeds from the IPO for expansion by setting up new retail stores and setting up new warehouses. It also plans to repay some of its debt, which should bring down interest costs and further increase its profitability.

Brokerage firm Prabhus Lilladher has recommended ‘subscribe’ rating to the IPO of FSN E-commerce Ventures which operates Nykaa. “We believe Nykaa’s foray into the fashion segment promises to focus on premium customers, curated and managed marketplace with over 1.8 million SKUs, NYKD, private labels like Pippa Bella, 20 dresses and industry leading AOVs . ₹3977 and ~25% contribution to GMV in 5MFY22,” the note said.