Shares of FSN E-Commerce Ventures (Nykaa) on Friday fell for the third straight session ahead of the expiry of the pre-IPO investors’ lock-in period on November 10.
The stock tanked over 7 per cent to hit a record low of Rs 975.50 a piece on BSE. The market cap of the firm slipped below Rs 48,000-crore mark.
Nykaa shares, which got listed last year on November 10, 2021, saw a listing pop of 79 per cent on its market debut.
On its listing day, the stock had opened at Rs 2,001 per share on BSE against the IPO issue price of Rs 1,125. The scrip later touched an all-time high of Rs 2,574 on November 26, 2021, but has fallen 62 per cent since then.
Foreign brokerage Nomura recently initiated coverage on the stock with a target of Rs 1,365.
“With high medium-term growth potential and unique positioning, we believe risk-reward is quite favourable for long-term investors with the potential for the stock to double over the next 5 years,” it said.
Elara Capital has also initiated its coverage with a ‘Buy’ call and a target price of Rs 2,211. This brokerage expects growth performance to continue in the medium term, as the company penetrates deeper into Tier 2/3 cities.
JM Financial has a ‘Buy’ rating on the stock with a September 2023 target of Rs 1,780.
Also read: Nykaa shares hit fresh low, inch closer to IPO issue price
The brokerage firm said the stock has valuations that are at a premium to most loss-making new-age companies. But it expects the Nykaa premium to sustain, as not many companies are estimated to deliver a gross merchandise value CAGR of 41 per cent, revenue CAGR of 39 per cent and Ebitda CAGR of 71 per cent over the FY22-27 period.
JM Financial believes any short-term dip should be a great accumulation opportunity for investors looking to build long-term positions in Nykaa.
Kotak Institutional Equities said that the correction in Nykaa shares is an opportunity to ‘Buy’.
It, however, highlighted that the cost of digital advertising is set to remain elevated for Nykaa, given the high competition among brands to target specific customers and the high cost of influencers.