Nykaa made a great start in the stock markets, M-cap earned Rs 1 lakh crore

Strong Listing Day gains have eroded Nykaa’s market capitalization 1 lakh crore, leaving behind other stocks like Hero MotoCorp, Bharat Petroleum Corporation Limited (BPCL), IndusInd Bank, Britannia, Dr Reddy’s, Tata Consumer, Eicher Motors, Cipla and UPL in the Nifty.

The only profitable unicorn to be listed on stock exchanges, Nykaa has attractive valuations, analysts had said ahead of the issue. As primary markets have become lucrative after the pandemic, two other unicorns, CarTrade and Zomato, were recently listed on stock exchanges.

“It is one of the very few profitable new age company and the first female led unicorn which has also attracted a lot of investor interest. Apart from leadership in online beauty and personal care (BPC) in India, Nykaa is one of the fastest growing fashion platforms in India based on gross merchandise value. Nykaa’s key strength lies in its inventory-based business model for the BPC segment, which allows it to offer certification for all its products and ensures availability and efficient delivery,” said Sneha Poddar, Analyst, Motilal Oswal Financial Services said.

Given Nykaa’s 35% market share in online BPC, they believe Nykaa BPC is well positioned to harness the high growth digital/online penetration in a fashion market.

NS Nykaa’s Rs 5,350 crore initial public offering (IPO) was subscribed 82 times during its share sale that ended on November 1.

Nykaa’s Gross Merchandise Value (GMV) has grown at 57% Compound Annual Growth Rate (CAGR) during FY19-21. GMV, or the total value of goods sold over a period, measures the use of the Site to sell goods owned by others. Its revenue and EBITDA grew 48% and 181% CAGR in FY19-21, while it turned profitable in FY21. Ebitda margin increased to 6.6% in FY2011, with free cash flow (FCF) being positive. It has a capital efficient business model with an asset turnover of 3 times in FY 2011.

Analysts say the company’s asset-light model and strong propensity among millennials to buy the brand in the beauty and personal care segments, make the share sale a favorable bet for investors. He added that Nykaa, which is owned by FSN E-commerce Ventures Ltd, has the potential to grow in the lifestyle e-commerce space with its scalable business model.

The promoter’s stake will come down from 54.2% to 52.6% after the listing. The funds raised will be used for setting up of new retail stores/warehouses, loan repayment and marketing.

Analysts at Elara Capital believe that successful execution in the fashion segment is the key to re-rating of Nykaa’s valuations in the medium to long term as the company does not enjoy first-mover advantage in the fashion segment, which Ajio currently enjoys. , Myntra dominates. , Amazon and Flipkart among others.

“While valuations on a value-to-earnings (PE) basis may sound expensive, Nykaa is one of the very few profitable unicorns in India, and we believe the company is well-positioned to benefit from the exponential growth in online beauty and fashion retailing business in the next decade,” said Jyoti Roy, an analyst at Angel One.

Nykaa has a portfolio of 13 proprietary brands. As of 31 August 2021, Nykaa had 3.1 million SKU offerings from 4,078 national and international brands across business segments.