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FSN E-comm (NYKAA) IPO review (May apply)

Review By Dilip Davda on October 25, 2021

•    FSNEV is a digitally native consumer technology platform.
•    It turned the corner in FY21 with superb results despite pandemics.
•    IPO valuations are highly stretched and making it an exorbitantly priced offer.
•    Risk seekers/cash surplus investors may consider parking of funds.

We have witnessed a shift in the fancy of IPOs from loss-making companies in the recent past and the best example is that of Zomato. This company too falls in that pack of unicorns as it has an e-commerce platform for fashion and personal care products. Based on financial parameters, the valuations are highly stretched and making this an expensive offer. Well managed grey market by vested interests may lure investors for listing gains, but prevailing market conditions at the time of listing will have the bearing on this exorbitantly priced offer. Its GMP which marked fancy before the formal price band announcement nosedived, is perhaps a precursor. 

FSN E-commerce Ventures Ltd. (FSNEV) popularly known as "Nykaa" is a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. Since its incorporation in 2012, it has invested both capital and creative energy towards designing a differentiated journey of brand discovery for its consumers. FSNEV has a diverse portfolio of beauty, personal care and fashion products, including owned brand products manufactured by it. As a result, the company has been established not only as a lifestyle retail platform but also as a consumer brand. It offers consumers an Omnichannel experience with an endeavour to cater to the consumers' preferences and convenience.

FSNEV's lifestyle portfolio spans beauty, personal care and fashion products. It offers these business verticals: - Nykaa: Beauty and personal care, and - Nykaa Fashion: Apparel and accessories In addition to leveraging its strengths in comprehensive merchandising, brand relationships and delivery experience, the company focuses on educating consumers via digital content, digital communities and tech-product innovations, which is an integral component of its business model.

As of August 31, 2021, it offered approximately 3.1 million SKUs from 4,078 national and international brands to our consumers across business verticals. Compared to other mature e-commerce categories, beauty and personal care and fashion have lower online penetration. FSNEV's beauty and personal care offering is extensive with 256,149 SKUs from 2,644 brands primarily across make-up, skincare, haircare, bath and body, fragrance, grooming appliances, personal care, and health and wellness categories as of August 31, 2021.

The company manufactures owned brand beauty and personal care products through third-party manufacturers contracted by it. FSNEV has entered into manufacturing agreements with several manufacturers in India, for the manufacture of such products which are sold under its owned brands such as "Nykaa Cosmetics", "Nykaa Naturals" and "Kay Beauty". The company's owned brands are available on its online and offline channels, as well as for certain brands at third party retailers.

As of August 31, 2021, Nykaa Fashion housed 1,434 brands and 2.8 million SKUs with fashion products across four consumer divisions: women, men, kids and home. Within these consumer divisions, it merchandises across several categories including western wear, Indian wear, lingerie, footwear, bags, jewellery, accessories, athleisure, home décor, bath, bed and kitchen in order to cater to the diverse consumers' journeys across the platform. It offers a mix of brands across established national brands, international brands, luxury brands, and emerging labels and designers.

To meet its requirements of funds for investment in subsidiaries (Rs. 42.00 cr.), capital expenditure (Rs. 42.00 cr.), repayment/prepayment of certain borrowings (Rs. 156.00 cr.), brand visibility and awareness (Rs. 234.00 cr.) and general corporate purpose, FSNEV is coming out with a maiden IPO for fresh equity issue worth Rs. 630.00 cr. (approx. 5600000 shares) and an offer for sale of 41972660 equity share of Re. 1 each to garner Rs. 5351.92 cr. based on its upper price band. The company has fixed a price band of Rs. 1085 to Rs. 1125 per share and the minimum application is to be made for 12 shares and in multiples thereon, thereafter. The issue opens for subscription on October 28, 2021, and will close on November 01, 2021. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 10.06% of the post issue paid-up capital of the company.  

FSNEV has reserved 250000 equity shares for its eligible employees and from the residual portion, it has allocated 75% for QIBs, 15% for HNI and 10% for the Retail category of investors. The company is offering a discount of Rs. 100 per share to eligible employees. 

Joint Book Running Lead Managers (BRLMs) to this offer are Kotak Mahindra Capital Co. Ltd., Morgan Stanley India Co. Pvt. Ltd., BofA Securities India Ltd., Citigroup Global Markets India Pvt. Ltd., ICICI Securities Ltd. and JM Financial Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue.  

Having issued initial equity at par, FSNEV raised further equity in the price range of Rs. 9.74 to Rs. 605.96 between February 2020 and September 2021 (based on the face value of Re. 1 per share). It has also issued bonus shares in the ratio of 2 for 1 in July 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NA, Rs. 6.31, Rs. 7.32, Rs. 8.30, Rs. 9.86, Rs. 10.95, Rs. 11.93, Rs. 15.39, Rs. 21.67, Rs. 29.70, Rs. 33.56, Rs. 56.54, Rs. 76.65 and Rs. 117.67 per share. 

Post issue, FSNEV's current paid-up equity capital of Rs.46.73 cr. will stand enhanced to Rs. 47.29 cr. post this IPO. Based on the upper price band, the company is looking for a market cap of Rs. 53204.01 cr. Thus these valuations are also stretched to a large extent. 

On the financial performance front, for the last three fiscals, on a consolidated basis, FSNEV has posted revenue/ net profit (Loss) of Rs. 1116.38 cr. / Rs. - (24.54) cr. (FY19), Rs. 1777.85 cr. / Rs. - (16.34) cr. (FY20) and Rs. 2452.64 cr. / Rs. 61.95 cr. (FY21). For the first three months ended on June 30, 2021, of FY22 it has earned a net profit of Rs. 3.52 cr. on a revenue of Rs. 821.71 cr. 

For the last three fiscals, on a consolidated basis, FSNEV has posted an average EPS of Rs. 0.44 and an average RoNW of 2.82%. The issue is priced at a P/BV of 72.72 based on its NAV of Rs. 15.47 as of June 30, 2021, and at a P/BV of 40.04 based on its post-issue NAV of Rs. 28.10 per share (based on the upper cap of the price band). 

If we annualize FY22 earnings and attribute it on fully diluted post issue equity, then the asking price is at a P/E of around 377.51 making it an exorbitantly priced offer.  

FSNEV has not declared any dividend in the last three and quarter financial year until the filing of this offer documents. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

As per offer documents, FSNEV has claimed it has no listed peers to compare with. However, in an unlisted place, it has many competitors. 

Six BRLMs associated with the offer have handled 52 public issues in the past three years, out of which 17 issues closed below the offer price on the listing date.

Conclusion / Investment Strategy

Well, this IPO created hype ever since it filed its DRHP and was eagerly awaited. Post Zomato episode, this IPO too created a fancy among primary market investors. However, based on its financial parameters, the issue is exorbitantly priced and hence risk seekers/cash surplus investors may consider investment for a long term reward. Others may avoid.

Review By Dilip Davda on October 25, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Nykaa IPO FAQs

  1. 1. Why Nykaa IPO?

    The initial public offer (IPO) of FSN E-Commerce Ventures Limited offers an early investment opportunity in FSN E-Commerce Ventures Limited. A stock market investor can buy Nykaa IPO shares by applying in IPO before FSN E-Commerce Ventures Limited shares get listed at the stock exchanges. An investor could invest in Nykaa IPO for short term listing gain or a long term.

  2. 3. Nykaa IPO what should investors do?

    Nykaa IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Nykaa IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Nykaa IPO good?

    Our recommendation for Nykaa IPO is to subscribe for long term.

  4. 5. Is Nykaa IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Nykaa IPO.

  5. 6. When will Nykaa IPO allotment status?

    The Nykaa IPO allotment status will be available on or around November 8, 2021. The allotted shares will be credited in demat account by November 9, 2021. Visit Nykaa IPO allotment status to check.

  6. 7. When will Nykaa IPO list?

    The Nykaa IPO will list on Wednesday, November 10, 2021, at BSE, NSE.


3. Ankur Goyal     Link|November 8, 2021 9:35:55 PM
I got message and my amount debited from account.
2. BHAGI RATH     Link|October 29, 2021 11:19:03 AM
I can't see Nykaa IPO in my SBI ASBA option why is it so?
1. BTSS     Link|October 27, 2021 9:38:28 AM
does any bosy have the timelines for NYKAA IPO