After the buzz Nykaa created in the stock market this week, what could have been the other thing to talk about. Although the IPOs have been the hot topic for discussion this year, and we have seen many IPOs getting successful recently, like IRCTC, Zomato, etc., what Nykaa did was unbelievable. Shares of Nykaa made a strong market debut on the Indian Stock Exchange on Wednesday. i.e., November 10 2021. The stock started trading at a premium of over 82% at Rs. 2,054 per share on NSE as compared to its IPO price of Rs. 1,125. Its market capitalization crossed ₹1 lakh crore in early deals. The stock closed over 10% higher at ₹2,208 per share on its first day on the BSE.
Nykaa was founded in 2012 by Falguni Nayar. The company has a diverse portfolio of beauty, personnel care and fashion products, including its owned manufactured brand products under its two business verticals — Nykaa and Nykaa Fashion. Nykaa has been gradually growing since its beginning and targeting a vast market share in its fashion domain.
Rising interest of the public in IPOs-
IPOs have been doing fairly well since the last couple of years, and the major credit of this goes to the public, who have been showing an overwhelming interest in the subscription of the IPOs. Since the pandemic struck the world and people have been sitting at home, we have seen a lasting effect on the stock market. This drastic change accrues to the fact that people, sitting idle at home, thought to enter the stock market and hence India witnessed a record surge in the number of Demat accounts during the lockdown. Hence, we have also been witnessing record highs of various stock indices like Sensex and Nifty 50. Therefore, this is why we have started receiving a good response for the IPOs, and people show interest in applying for the IPOs.
Nykaa founder becomes India’s first self-made female billionaire-
The founder of Nykaa, Falguni Nayar, became a billionaire when the shares of Nykaa made their market debut on November 10. In 2012, she started the company at the age of 50 with no experience and today holds the pride of being the first self-made female billionaire. She was thinking of providing beauty products to women and men in the country online. Earlier, Indians primarily relied on smaller neighbourhood stores and cosmetics shops to buy beauty products physically. With the launch of Nykaa, cosmetics and skincare products were just a phone tap away, and the range of options increased drastically with the introduction of international brands and those which were never heard of. Now Falguni Nayar’s wealth is estimated to be $6.5 Billion.
Nykaa- Future Objectives-
The popularity of growing e-commerce was already at its peak in the pre-Covid world, let alone the scenario of the post-Covid world. Online businesses are witnessing substantial growth because of various factors, and hence what Nykaa pans for its future sounds foolproof. The company looks sustainable in the future because of its broad vision. Nykaa intends to dedicate the funds raised in the IPO for the following purposes:
1. Rs. 42 crores will be used to set up new physical retail stores over the next 3 years
2. Rs. 42 crores will be utilized to set up new warehousing
3. Rs. 234 crores will be used for the marketing of its brand
4. Rs. 156 crores will be used for repayment of their loans
5. A maximum of 25% of net proceeds from the IPO will be used for general corporate purposes.
According to DHRP, Nykaa’s revenue from operations for the Financial Year 2021 witnessed a rise of around 38% on a YoY basis. Nykaa is amongst the few profits making e-tailers in India. Nykaa has a substantial BPC market opportunity of Rs.1,120 billion, growing at 12% per annum to Rs.1,981 billion in 2025. Also, the company has a considerable fashion opportunity of Rs.3,794 billion is expected to grow at 18% per annum to Rs.8,702 billion in 2025. Therefore, Nykaa has a total addressable market of Rs.10,683 billion across beauty and personal care and fashion.
Source- Trade Brains
Conclusion-
Undoubtedly, Nykaa’s IPO has created the buzz in the stock market by witnessing a surge of around 82% on its debut on the Indian Stock Exchange. After overviewing the response of the public, various statistics and the vision of the company, the company looks substantially sustainable in the future. One can hold the stocks of the company for a good period of time as an anticipated growth chart of the company is clearly visible. Yet, nothing could be said about the stock market. The regular or irregular correction in the stock market is nothing new to it. We might be able to predict more after seeing the performance of the stock in the market for a wider period of time.
Guidance by Prof. Deepak Tandon
Written by: Ansh Gupta PGDM 2021-23
References-
https://in.investing.com/analysis/nykaa-ipo-the-future-of-online-ecommerce-200501320https://www.livemint.com/market/ipo/nykaa-ipo-share-listing-today-experts-predict-up-to-95-listing-gain-11636504863002.html
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