Looking to invest in Nykaa’s IPO? Here’s what analysts are saying

• Nykaa aims to raise ₹5,352 crore with this public issue.
• About 17 investors are set to sell 4.3 crore equity shares in this IPO.
• Nykaa’s profitability is one of the major reasons for analysts' recommendation for the stock.

Nykaa’s initial public offering (IPO) opens for bidding on Thursday (October 28) and it is one of the most sought after events in the Indian startup ecosystem, after the blockbuster listing of Zomato in the public market.

The beauty and fashion ecommerce company aims to raise ₹5,352 crore with this public issue. Of which, nearly ₹630 crore will be raised through fresh issue of shares.

Another reason behind the hype of Nykaa’s IPO is its profitability. The company has been EBITDA (earnings before interest, taxes, depreciation, and amortisation) positive since the financial year 2019. The indicated that the company was profitable at an operational level, even if it was reporting a loss after tax.

Nykaa also reported a profit after tax in FY2021, which ended in March this year.

This profitability and the potential to go better in the future are few of the reasons why analysts are recommending investors to give Nykaa’s IPO a shot.

Hem Securities noted that Nykaa’s financial statement for the last three years highlights that the company is “focused” on capital efficiency and unit economics, while simultaneously building for scale and growth.

The stock broker has issued a “subscribe” call for Nykaa’s IPO, looking at Nykaa’s scale of operations, strong management team, profitable concerns and high growth prospects.

“The company is also serving an underpenetrated market — only 8% of the beauty and personal care segment is via ecommerce. Thus, the opportunity exists to cater to a large market size of $152 billion by 2025 for beauty, personal care and fashion and $28 billion alone for beauty and personal care,” Neha Khanna, Director at ValPro, said.

“Considering the future prospect for the company and its being placed at a sweet spot as the first mover advantage we assign “Subscribe-Long Term" Rating to this IPO," said brokerage house Anand Rathi.


Even KRChoksey expects Nykaa to benefit from several factors including the tailwind in the beauty and fashion ecommerce industry, its technology led platform, strong relationships with global brands and its own diverse set of brands.

The stock broker also believes that Nykaa’s planned expansion into the Middle East and European market — along with the focus on India’s Tier II,III cities — will work in favor of the company.

“Nykaa also plans to open more retail stores, setting up warehouses and reducing its borrowings which augurs well for the company in the long term,” KRChoksey added.

Meanwhile, 17 investors — both institutional and individuals — are all set to sell 4.3 crore equity shares as part of this public issue. This includes Sanjay Nayar Family Trust, TPG. Lighthouse India fund and others.

Nykaa’s shares will be available at a price band of ₹1,085 to ₹1,125. An investor will have to subscribe to a minimum of 12 shares.

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