Nykaa trades flat as bonus issue saves selling pressure after lock-in expiry

The company set the date when shares adjusted for bonus on the same day many were expecting heavy sell-off due to lock in expiry. This can be said to be a masterstroke as optics of lower share prices will likely take off some selling pressure due to shares dumped by larger investors.

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Shares of FSN e-Commerce Ventures, the parent company of Nykaa, traded almost flat amid heavy volume and volatility after the lock-in period for pre-IPO investors expired on November 10. The stock also adjusted for the bonus issue from today.

The counter traded at Rs 175.25 on BSE, down about 2.5 percent over the previous close.

The company had announced a 5:1 bonus issue that received shareholders’ approval earlier this month. It also decreased the share price of Nykaa to a sixth of previous price. Thus, every shareholder will get five shares of Nykaa for every one share they hold.

The company has already been credited to the demat account of shareholders, a Nykaa shareholder confirmed. Hence, these extra shares will be available for trading from today.

The company set the date when shares adjusted for bonus on the same day many were expecting heavy sell-off due to lock in expiry. This can be said to be a masterstroke as optics of lower share prices will likely take off some selling pressure due to shares dumped by larger investors.

“The company believes that bonus shares will encourage the participation of retail investors in the long term, as well as see a wider shareholding,” the company said in a statement.

According to the large trade data available on Bloomberg, 1.43 crore shares changed hands as of 9.30 am.

The stock has been under heavy selling pressure ahead of the lock-in expiry. The counter slipped to a record low of Rs 163 (adjusted price) before recovering to current levels. It is still down 50 percent year to date (YTD).

Most analysts are bullish on the counter and they believe investors should buy the dip.

“The stock has corrected partly due to the global tech sell-off on rising yields and more recently due to the imminent lock-in expiry,” said Amit Sachdeva, India Equity Strategist at HSBC Securities and Capital Markets. “We believe valuation is now even more appealing and under-appreciates the structural growth opportunity in beauty and personal care.”

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