Nykaa IPO: Brokerage Views On Whether To Subscribe Or Avoid

Nykaa's IPO opens for subscription on Oct. 28 and closes on Nov. 1.

<div class="paragraphs"><p>A display of Nykaa branded nail enamel at a Nykaa store in New Delhi, India. (Photographer Anindito Mukherjee/Bloomberg)</p></div>
A display of Nykaa branded nail enamel at a Nykaa store in New Delhi, India. (Photographer Anindito Mukherjee/Bloomberg)

Brokerages recommend investors to subscribe to Nykaa's initial public offering for listing-day gains, deriving optimism from its diverse beauty and personal care portfolio, ability to retain customers and strategies to attract new users, and digital capabilities, among others.

FSN E-Commerce Fashion Ventures Ltd., the parent of the beauty fashion products marketplace, is set to launch a Rs 5,352-crore IPO. That includes a Rs 630-crore fresh issue and the rest an offer-for-sale.

The maiden offer of the nine-year-old company will open on Oct. 28 and close on Nov. 1.

Nykaa IPO Details

  • Price Band: Rs 1,085-1,125 apiece.

  • Retail investors quota: 10%, QIB: 75%, Non-institutional investors: 15%, Employees have 2.5 lakh equity shares reserved for them.

  • Minimum bid quantity: 12 or multiples of 12.

  • Nykaa intends to use the proceeds from the IPO to invest in subsidiaries and set up new retail stores.

Nykaa IPO: All You Need To Know Before Subscribing

Here's what brokerages have to say about Nykaa's IPO.


  • Recommends 'subscribe' on the IPO.

  • Nykaa's total addressable market across beauty and personal care and fashion of Rs 4.91 lakh crore is expected to grow to Rs 10.68 lakh crore by 2025.

  • Company has a huge opportunity worth Rs 1.12 lakh crore in beauty and personal care market.

  • Nykaa's fashion opportunity is expected to grow at nearly 18% per annum till 2025.

  • Growth to be driven by market shift towards organised sector and high growth of e-commerce.

  • Headroom for further online penetration remains a positive trigger for Nykaa.

  • Nykaa's diverse portfolio of 2,644 brands in beauty and personal care across make-up, skincare, haircare, bath and body, fragrance, among others, augurs well for the growth prospects.

  • Company's strength lies in its ability to retain customers.

  • Strong follower base on social media, network effects and digital capabilities expected to help the company promote its products and acquire new customers.

  • Company's strategy to attract new customers, track record of being brand custodian, focus on owned brand portfolio and expansion of omni channel capabilities likely to drive the company's growth.

  • Expects Nykaa to benefit from prevailing tailwind in the industry.

  • Considering the company's plans to expand in the Middle East and Europe and grow in Indian tier II and tier III cities as well as the strong management team, investors should look to invest in Nykaa's IPO for listing gains as well as the long term opportunity it presents.

Elara Capital

  • Recommends 'subscribe' on the IPO.

  • Company enjoys strong customer recall in beauty and personal care due to trust, differentiated marketing/content strategy, first-mover advantage/competitive edge and sticky existing customer base.

  • Rising penetration and high frequency to drive growth in beauty and personal care segment.

  • Fashion segment likely to grow at a faster pace on the small base.

  • Nykaa could trade at one-year forward EV/sales of 6-8x, purely based on its core beauty and personal care offering.

  • Successful execution in the fashion segment is key to the valuation re-rating in mid-to-long term.

Arihant Capital

  • Recommends 'subscribe' for listing gains.

  • Diverse portfolio of beauty and personal care products and omnichannel adaption remain key growth drivers.

  • Strong influencer network and digital prowess augur well for the company's growth prospects.

  • Positive on the company due to its lifestyle focus, portfolio of luxury and prestige products and resilience and capital efficiency in the business.

Motilal Oswal

  • Recommends ‘subscribe’.

  • Likes Nykaa given its leadership position in online beauty and personal care market, customer centric approach, profitable tech platform and capital efficient business model.

  • The issue is valued at 16 times the EV to sales ratio, which seems to be similar to other Indian unicorns.

  • Nykaa is rightly placed to tap the high growth digital/online penetration in the beauty and fashion market.

  • Nykaa’s key strengths lie in its inventory-led business model for the beauty and personal care segment, which allows it to offer authentication for all its products and ensures availability and efficient distribution.

  • Investors with a high risk appetite can subscribe for listing gains given fancy for unique and first of its kind listing in the e-commerce space.

Swastika Capital

  • Recommends subscribing only for listing day gains.

  • Nykaa redefined the art of e-retailing beauty and personal care in India.

  • Q1FY22 financials also looked better than previous years, but need to see how it grows further.

  • The beauty and personal care market have a large market opportunity especially in India where millennials are more into buying brands and look for easy buying options such as e-commerce.

  • At the upper price band of Rs 1,125, the price to earnings ratio works out to be 839x and the price to sales at 21.6 times its FY21 earnings. The valuation of the IPO is pretty high, however, eyeing the higher valuations of other unicorns some listing gains are expected.

Religare Broking

  • Recommends ‘subscribe’ for long term.

  • Nykaa has a large market opportunity aggregating Rs 10.6 lakh crore in the fast-growing beauty, personal care and fashion industry by 2025 in India.

  • The growth is projected to be primarily driven by the market shift towards the organised sector, high growth of e-commerce due to increased internet penetration, growing wallet share for beauty, personal care and fashion products and increased spending leading to subsequent premiumisation across categories.

  • Compared to other mature e-commerce categories, beauty and personal care and fashion have lower online penetration. Nykaa is well placed to benefit from growing industry trends given its resilient, capital-efficient business with a combination of strong growth and profitability.

  • Nykaa intends to continuously acquire new customers and increase its customer loyalty. It also plans to expand into lifestyle adjacencies and launch new channels. It also aims to explore expansion selectively and prudently into international markets.

  • Given the positive industry prospects and Nykaa’s strong foothold, the brokerage is a positive on the company for the long term.

Hem Securities

  • Recommends ‘subscribe’ for listing gains and long term.

  • ​​Nykaa has a large beauty and personal care market opportunity growing at 12% per annum by 2025 and fashion opportunity is expected to grow at 18% per annum by 2025.

  • The company has posted strong growth without substantial cash burn and has posted profits along with strong improvement in capital turnover ratio. This shows that company has focused on capital efficiency and unit economics, while simultaneously building for scale and growth.

  • Hence, looking after scale of operations, strong management team, profitable concern and high growth prospects in industry due to large underpenetration, the company has created an industry itself.

  • The company hase the highest average order value among the leading online beauty and personal care platforms in India and is the largest luxury beauty and personal care platform in India.

  • Founder-led company supported by a professional management team

  • Resilient, capital efficient business with a combination of strong growth and profitability.

BP Wealth

  • Recommends ‘subscribe’ on the IPO.

  • Nykaa has strong consumer engagement, hence it becomes imperative for more brands and more sellers to be associated with them.

  • Nykaa has gained significant prominence not only as a lifestyle retail platform but also as a leading lifestyle brand and influencer

  • Nykaa has the perfect mix of luxury and mass brands making it the preferred destination for consumers across India.

  • Falguni Nayar has been the driving force in developing and growing the business. Her intuitive entrepreneurship coupled with her desire to transform the lifestyle e-commerce space in India, complemented with a professional management team are the key driving forces for Nykaa’s overall success.

  • Their sizeable volume of content drives increased organic traffic and retention on their platform, which in turn drives higher engagement and better experience.

  • There is an underlying risk for high valuations but considering factors such as increasing PAT, positive cash flows, huge growth capabilities and confidence in the company’s management, the brokerage recommends subscribing to the IPO.

Prabhudas Lilladher

  • Recommends 'subscribe' rating.

  • Nykaa has revolutionised online retailing of beauty and personal care products.

  • Nykaa's strong customer following and repeat purchase is due to a inventory-led beauty and personal care model, wide product range, brand diversity and availability across pin codes, consumer education, ability to bring global brands to domestic consumers and traction for private brands like Nykaa Beauty, Nykaa Naturals.

  • Nykaa likely to focus on premium customers and curated marketplace offerings.

  • Expects the company to witness steady margin expansion led by scale economies.

  • Nykaa can sustain a CAGR of 35% in sales, 50% in Ebitda over the next few years with double digit margins

  • IPO at 12.6x EV/GMV on FY21 sales offers long-term value.

Anand Rathi

  • Assigns 'subscribe-long term' rating given the company's growth prospects and sweet spot positioning due to first-mover advantage.

  • Nykaa's diverse portfolio and own brands have helped establish the company as a consumer brand and not only a lifestyle retail platform.

  • Omnichannel experience and focus on reaching out to consumers augurs well for the company's growth prospects.

  • Increase in smartphone penetration to aid digital-only brands like Nykaa.

  • Rising spends on essential health and wellness products to provide impetus for further growth for Nykaa.

  • The company's unique business proposition renders it suitable to clock steady growth from a long-term perspective.

Rarefied Club of Billionaire Indian Women to Grow With Nykaa IPO