Nykaa hits new all-time low amid slew of block deals in past one month

Shares of Nykaa parent company – FSN E-Commerce Ventures hit a new all-time low of Rs 161.90, as they slipped 3 per cent on the BSE in Monday’s intra-day trade in an otherwise firm market. Share price of the beauty e-retailer fell below its previous low of Rs 162.91, touched on October 28, 2022. In comparison, the S&P BSE Sensex was up 0.45 per cent at 61,612 at 11:26 AM.

In the past two trading days, the stock price of Nykaa has declined 5 per cent after Kravis Investment Partners II offloaded 36.7 million shares of the company at a price of Rs 171 apiece, worth Rs 629.06 crore through open market transactions via multiple block deals on the BSE, the exchange data shows.

On Thursday, December 15, 2022, big ticket investors belonging to FPI and DII category bought fresh stake in Nykaa. According to BSE block deal details, Goldman Sachs, Mirae Asset Mutual Fund, ICICI Prudential Life Insurance Company and Canada Pension Plan Investment Board bought stake in FSN E-Commerce Ventures.

Meanwhile, in past one month, the stock has slipped 16 per cent after the company’s chief financial officer (CFO) Arvind Agarwal resigned. Agarwal stepped down from his role on November 25, Nykaa had said in a regulatory filing on November 22.

On same day, private equity firm Lighthouse India had sold 18.44 million equity shares worth of Rs 336 crore of the company through a block deal. Domestic mutual funds including Aditya Birla Sun Life Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund and foreign portfolio investors like BofA Securities, BNP Paribas Arbitrage and Society Generale were the buyers via block deals, the data shows.

Meanwhile, in the past one year, Nykaa has underperformed with its share price down 54 per cent, as compared to 8 per cent rise in the S&P BSE Sensex. It has corrected 62 per cent from its record high of Rs 429 (adjusted to 5:1 bonus share), touched on November 26, 2021.

Nykaa has emerged as one of India’s leading lifestyle-focused consumer technologies platforms.

According to a Bloomberg report, the relentless rout in shares of home grown technology start-ups since their much-hyped initial public offerings (IPO) last year has driven some of them to use surprise tactics to arrest the slide, drawing scrutiny from investors and market experts. Nykaa which announced a bonus share issue to coincide with the expiry of an IPO lock-up on key investors in November that risked extending the stock’s slump.

While within the rules, several market experts say these actions show an obsession of sorts that newly listed firms have with their stock prices, the Bloomberg reported. CLICK HERE FOR FULL REPORT

“Nykaa is an efficient online business; its success in part is due to the absence of potent competitors (this is gradually changing). Ex-ad income, lack of non-linear monetization levers forces us to realign our valuation compass somewhere between a linear business and a pure platform,” analysts at HDFC Securities said in its initiate coverage report dated November 2. The brokerage firm has ‘sell’ rating on the stock with a target price of Rs 133 (adjusted to bonus).