Nykaa IPO: Price reached 60% premium in the gray market before the opening of IPO, this is the opinion of experts regarding investment

Nykaa IPO: The Rs 5352 crore IPO of Nykaa, a startup company selling beauty products, will open on October 28. The price band of Rs 1085-1125 per share has been fixed for this IPO. This issue will be open for subscription till November 1. Before the opening of the IPO, its shares in the primary market have reached a premium of Rs 660 against the IPO price. Today, Monday 25 October, its shares are at a price of Rs 1785, which is about 60 percent more than the IPO price. Its shares can be listed in the market on November 11. According to market experts, this IPO is expensive but considering its better growth potential, you can subscribe to it.

Highlights of the issue

The price band of Rs 1085-1125 per share has been fixed for the Rs 5352 crore IPO of Nykaa. This IPO will be open for subscription from 28 October-1 November.

The lot size of 12 shares has been fixed for investing in the IPO, that is, according to the upper price of the price band, investors will have to invest at least Rs 13,500. 75 percent of the IPO of this beauty startup of FSN E-commerce Ventures is reserved for qualified institutional buyers (QIBs), 10 percent for retail investors, and the remaining 10 percent for non-institutional investors.

Under the issue, new shares worth Rs 630 crore will be issued and about 4.19 crore shares will be sold under offer for sale (OFS).

According to the Red Herring Prospectus (DRHP) filed with the market regulator SEBI, the employees of the company applying under the Employees Reservation System will get a discount of 10 percent on the offer price.

This is the opinion of experts regarding investment

The company’s revenue grew by 38 percent year-on-year in the last financial year 2021. According to Abhay Doshi of UnlistedArena.com, the beauty, and personal care segment currently account for only 8 percent of the fast-growing e-commerce segment, giving startups like Nykaa a lot of growth potential. Although he believes that its valuation is 21x according to the upper price of the price band of Rs 1125, which looks very expensive, at the moment the valuation of the startup is being done in the same way. According to Doshi, investment in this is attractive considering the quality of promoters, profitability of the company, and scope of growth.

The weighted average return on net worth stood at 2.82 percent in the last three financial years. According to the analyst, valuing it according to the IPO price of Rs 1125, then the price is 839.5 times the earnings, 21.6 times compared to FY 2021 sales, and 16.2 times compared to annualized sales. Given this valuation, Aditya Kondawar, COO, JST Investments, believes the issue is expensive, though Kondawar says Nykaa is a profitable company, unlike other startups that got listed this year. Apart from this, the prospects of its business growth are looking better. Kadavar has advised subscribing this issue for the long term.