Shares of FSN E-Commerce Ventures (Nykaa) on Wednesday hit a fresh all-time low of Rs 1,130 a piece on BSE, which was close to the issue price of Rs 1,125 that its IPO investors were allotted shares at.
The scrip fell 1.24 per cent to hit a new low of Rs 1,130 on BSE, taking its fall from 52-week high to 56 per cent. The new age stock debuted on November 10, 2021, at a 79 per cent premium over its issue price. But the scrip has been sliding of late.
At present, Nykaa trades at 4.9 times estimated FY25 revenue and 53.9 times estimated Ebitda multiple.
JM Financial 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 gross merchandise value CAGR of 41 per cent, revenue CAGR of 39 per cent and Ebitda CAGR of 71 per cent over FY22-27 period.
CAGR stands for compounded annual growth rate.
“We have a ‘BUY’ rating on the stock with a September 2023 target of Rs 1,780 and believe any short-term dip should be a great accumulation opportunity for investors looking to build long-term positions in Nykaa,” the brokerage said.
That said, with pre-IPO shareholders’ lock-in set to expire on November 10, it will be crucial to see if investors liquidate or continue to hold for further gains, the brokerage said.
“While Nykaa is certainly a differentiated play but the fact that 12 per cent shareholding is sitting on 100x returns might even be a reason enough for these investors to diversify their portfolio that might be overweight Nykaa. We also note that a majority of these investors did generate liquidity during the OFS and secondary sales prior to the IPO,” JM Financial said.
Furthermore, 70 per cent of the share capital that is getting unlocked belongs to patient capital such as HNIs and family offices, which might not be obliged to sell due to tenure of funds, the brokerage added.