Nykaa Shares Plunge Below IPO Issue Price. Should You Buy?

"The current market price of Nykaa still implies strong valuations compared to most traditional companies but that does not factor in the growth seeds that the firm is planting by investing in fashion and e-B2B segments," said JM Financial.

Mumbai: The share price of Nykaa’s parent company, FSN E-Commernce Ventures Ltd, fell over 2 per cent on Tuesday and dropped below its initial public offer (IPO) price of Rs 1,125. At 2:53 pm IST, Fsn E-Commerce Ventures Ltd’s share price was down 31.95 points or 2.79 per cent at 1,111.95.

Even though the market price of Nykaa has fallen 56 per cent from its record high level of Rs 2,524, which it had touched on November 26, 2021, experts are still pinning hopes. Brokerage JM Financial expects Nykaa to deliver 50 per cent/47 per cent year on year growth in GMV/revenue led by strong growth in fashion and new initiatives and some benefit of base effect due to Covid-19 impact in Q2FY22.

“The current market price of Nykaa still implies strong valuations compared to most traditional companies but that does not factor in the growth seeds that the firm is planting by investing in fashion and e-B2B segments,” said JM Financial.

“With incremental scale being achieved by growth across BPC, Fashion and Others (B2B Superstore primarily) verticals, we expect EBITDA margin to improve by 60 bps sequentially and 132 bps YoY due to lowering of fulfillment costs due to regional centres and operating leverage. The company continues to expand omni-channel presence with its focus on new initiatives such as eB2b, which it believes will provide a significant opportunity over the next 3-5 years,” the brokerage added.

“Investments in the differentiated value proposition of content, curation, and convenience are yielding results. We model revenue and core profit CAGRs (compound annual growth rates) of 42 percent and 90 percent respectively over FY22-FY24,” ICICI Securities commented, also giving a hold rating to the share with a target price of 1,250, according to Moneycontrol.