Nykaa Unlikely To See Big Selloff When Lock-In Ends, Says Jefferies
The bonus shares would likely be credited by Nov. 15, limiting a potential selloff on the lock-in expiry day, says Jefferies.
There may not be a "big" selloff in shares of FSN E-Commerce Ventures Ltd., Nykaa's parent, when the anchor lock-in period ends because of the bonus share issue, according to Jefferies.
"The bonus (five shares for everyone) complicates, as shareholders (pre and post IPO) on Nov. 10 would be able to sell only 17% of their holdings," the brokerage said in its investor note.
As per regulations, pre-IPO lock-in is expected to end for the online retailer on Nov. 10, while the record date for the share bonus, as announced by the company's board, is Nov. 11.
The bonus shares would likely be credited by Nov. 15, taking off a potential sell-off on the lock-in expiry day, Jefferies added.
The brokerage, in its report, added that the bonus shares also attract short-term capital gains if held for less than 12 months.
The concerns around the lock-in expiry are "high," the brokerage said. While existing shareholders will only have 17% (1/6th) of their holding, the remaining 83% will be available only by Nov. 15, it added.
Jefferies kept a 'buy' rating for the stock with a price target of Rs 1,650, implying a potential upside of 46%.
The stock witnessed some selloffs in the past few months, with the shares falling as much as 17.19% since Sept. 1. It, however, recovered some of the losses last week.
Nykaa has dropped 48.68% since its listing last November.
The stock fell as much as 3.67% intraday on Wednesday. The total traded volume is 0.7 times the 30-day average. Of the 20 analysts tracking the company, 15 maintain a 'buy,' three suggest a 'hold,' and two recommend a 'sell'. The return potential of the stock is 36.3%.