Shares of Nykaa (listed as FSN E-Commerce Ventures Limited) zoomed 20 per cent today a day after foreign portfolio investors (FPIs) bought stake in the online fashion retailer via open market transactions. Aberdeen Standard Asia Focus Plc (4.27 million), and Norges Bank on account of Government T Petroleum Fund (3.98 million) purchased a combined 8.25 million shares of the company via block deals, the exchange data show.
Buoyed by the development, shares of Nykaa zoomed 19.53 per cent to Rs 224.65 amid a rising market in early trade today. The shares are trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The stock has slipped 41.27 per cent in a year and fallen 38.08 per cent in 2022. It touched a 52-week high of Rs 429.86 on November 26, 2021 and hit a 52-week low of Rs 162.91 on October 28, 2022 on BSE.
Total 129.14 lakh shares of the firm changed hands amounting to a turnover of Rs 245.32 crore. Market cap of the firm rose to Rs 61,935 crore on BSE. On the other hand, three entities- Lighthouse India Fund III, Mala Gopal Gaonkar and Narotam S Sekhsaria- sold 2,84,34,390 shares of Nykaa’s parent firm at an average price of Rs 171.75-Rs 173.70 apiece, for Rs 491.35 crore through open market transactions, as per the bulk deal data available with the NSE and BSE.
In the previous session, shares of Nykaa fell 7.15 per cent to hit a low of Rs 166.85, as the one-year lock-in period for pre-IPO shareholders expired, triggering selling pressure on the counter. The scrip also turned ex-bonus in the same session.
On October 10, the fashion retailer announced a bonus issue of shares in the ratio of 5:1. Those holding one share of Nykaa would be entitled to five shares of the company during the bonus issue.
Here’s a look at what experts said on the outlook and target price of the Nykaa stock.
Pavitraa Shetty from Tips2trades said, “After a terrible stock price performance post listing where the stock price corrected over 50% from its listing price, strong Q2FY23 results followed by a bonus issue coupled with expectations of easing inflation has led to a sharp bounce back in Nykaa’s stock price from recent lows. A daily close above Rs 218 could lead to targets of Rs 248-260 in the near term. Investors can buy on a dip near Rs 198-200 for above mentioned targets.”
Pravesh Gour, Senior Technical Analyst, Swastika Investmart said, “The stock has formed a piercing line candlestick pattern as well as a double bottom formation on the daily chart, which is confirming the bottom formation of the stock. It is trading above its all-important moving averages with higher highs and higher lows. On the upside, 240 is the immediate horizontal resistance; above this, we can expect 280 plus levels in the near term. On the downside, a cluster of moving averages forms the base at around Rs 185.”
The company reported a 344 per cent (Y-o-Y) jump in net profit at Rs 5.20 crore in the September quarter. Consolidated revenue from operations increased 39 per cent year-on-year to Rs 1,230 crore, the company said. Margins improved to 5 per cent in the September quarter from 3.3 per cent YoY.
Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking believes the current rally is temporary in nature.
“Consecutive lower low formation in both weekly and daily time frames indicates that the trend in the stock has been methodically negative. However, amid such negativity, prices are at extremely oversold conditions in a daily time frame. Hence, a relief rally or a consolidation in prices can be seen before swaggering back to its negative momentum. The entire upmove of the last few sessions is well channeled with immediate resistance seen around 250 from the upper panel of the pattern which further coincides with the immediate swing high of Oct’22. The recent rally of more than 20% can be temporary in nature rally until and unless it surpasses the said resistance point. Daily MACD and 14-period RSI has generated a buy signal moving above its nine periods average thus validating positive bias. However, its inability to surpass 250 would continue to maintain a negative and chances remain high of a downside rally towards 150-165.”
Ravi Singhal, CEO at GCL said, “After the one-year lock-in period for the company’s anchor investors expired, the market believes that the big-ticket sellers have left and the stock is now trading at its lowest levels. This sentiment was fueled further by the purchase of new stakes by FIIs such as Norway’s Norges Bank on behalf of the Government Petroleum Fund and Aberdeen Standard Asia Focus. However, the stock is still in base building mode, and investors should wait for the stock to exit its base building moves.”
Ravi Singh, Vice President & Head of Research, Share India said, “Nykaa has issued 5:1 bonus shares through which shareholders will get 5 shares for every 1 share of Nykaa. It may reduce some selling pressure on pre-IPO investors. Along with this, those holding the shares will also get incentives. However, the high valuations of consumer tech-based companies and weak cash-flows from operations remain a cause for concern. Its effect will be seen on the performance even further.”
Rajesh Sinha, senior Research Analyst at Bonanza Portfolio said,” Stock price of Nykaa rallied 20% today as foreign investors bought a total of 2.53% stake in FSN E-Commerce Ventures, the operator of multi-brand beauty retailer, through open market transactions. Foreign investors bought some of the shares sold by a few pre-IPO shareholders following the expiry of the one-year lock-in period. On Thursday too, the stock was up due to good quarterly results and stock was also ex-bonus too. Nykaa will issue five bonus shares for every equity share held by shareholders. Nykaa is the only profitable online Beauty and Personal Care (BPC) player amongst its peers like Myntra, Purplle and MyGlamm. Its BPC business is of asset-light in nature and hence commands better margin profile. With higher share of private labels, rising marketing support revenue and lower fulfilment costs, we believe, Nykaa’s operating efficiency in BPC is expected to continue going ahead as well. Key metrics such as total visits and time spent also suggest that Nykaa is much ahead of peers due to trust/reliability in the premium products category. We advise investors may consider any dip in the stock price of Nykaa to invest for a long-term prospective.”
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