Nykaa IPO: Bumper listing delivered; should you re-order?

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The wait to participate in India’s booming start-up ecosystem and invest in the online marketplace for beauty and wellness products is finally over with FSN E-Commerce Ventures, the operator of Nykaa and Nykaa Fashion chain listing on the bourses. After delivering a glamorous stock market debut at Rs 2,018 per share marking a premium of 79.38% or Rs 893, the stock rallied further and was quoting at Rs 2,042.60 with gains of 81.56% over its issue price of Rs 1,125 per share on the NSE. On an intraday basis, the stock made a high of Rs 2,129 apiece.

Such a stellar listing took the company’s market capitalization to Rs 1,00,686.20 crore to become among the top 100 elite and most valuable companies in the country.

Analysts review

Many retail investors were disappointed on non-allotment given just 10% of the issue was reserved for the retail investors. So would it be right for investors to re-order the shares from the open market at such a high premium or not? To find answers to this Money9 spoke to multiple analysts to find out how are they reviewing the listing gains and listing strategy.

“Upside momentum may continue for at least 1-2 days then it may be stabilized for some time because valuation could be a concern after a big listing gain. However, the 2000 level could act as a support level in the near term. It may head towards 2100/2200 levels even after a big opening. Those who were playing for listing gain can keep a stop loss of 1950 while aggressive investors are advised to hold this stock for the long term because it is one of the few stocks in new-age companies to own into your portfolio. It is difficult to buy after a big gain at opening however fresh investors can accumulate in parts where they can buy 25℅ at the opening of what they want to invest into this stock while if it witnesses any correction towards 1800 level then they can add more,” said Santosh Meena, Head of Research at Swastika Investmart.

While Saurabh Joshi of Marwadi Shares and Finance is of the opinion that the risk-reward ratio for holding the stock does not look favourable at this valuation and one should consider booking profits at this point in time. “The company listed at Rs 2,018/- per share with a market cap of Rs 94,936 crore implying a valuation of 747.41 P/E. Although there are no listed entities in India whose business portfolio is comparable with that of Nykaa, the valuations on an absolute basis are substantially high,’ Joshi added.

On the contrary Siddhartha Khemka, VP – Head of Research (Retail) at Motilal Oswal Financial Services like given its leadership position in the online BPC ((beauty & personal care) market, customer-centric approach, profitable tech platform and capital-efficient business model.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)