Handsome gains for TPG, Fidelity, Steadview Capital and HNIs as Nykaa’s lock-in period nears end

On November 9, almost 67 percent of Nykaa’s shareholding will be released from lock-in, which equals to about 310 million shares

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Private equity funds and high networth individuals (HNIs), who were early investors in cosmetics-to-fashion retailer Nykaa, are sitting on robust gains as the company’s pre-IPO shareholder lock-in period nears its end.

During a lock-in period, promoters and investors cannot liquidate the pre-IPO securities held by them. On November 9, almost 67 percent of Nykaa’s shareholding will be released from lock-in. That is equal to about 310 million shares.

Also Read: 11 stocks to watch out for as lock-in period expires in November

Steadview Capital Mauritius, TPG Growth, Lighthouse India Fund, and HNIs like Harindarpal Singh Banga, Narotam Sekhsaria and Sunil Kant Munjal will be eligible to sell their holdings.

Promoter Falguni Nayar and family will also be able to sell a 32.4 percent stake, which is around 145 million shares.

Analysts say the promoters will hold on to their stake for the long term and are unlikely to sell their holding.

Meanwhile, other pre-IPO shareholders are “sitting on 100x returns which is reason enough for these investors to diversify their portfolio that might be overweight Nykaa,” said JM Financial.

HNI holdings

For instance, the founder of Caravel Group Harindarpal Singh Banga, who has a 6.4 percent stake in the company, had acquired shares at an average cost of Rs 7.3. Based on Nykaa’s current market price of Rs 1,180 (at the time of writing this story), he is sitting on 161x returns.

Investment by another HNI, Narotam Sekhsaria, founder of Ambuja Cement, has multiplied over 120 times. He has a 3.1 percent shareholding in Nykaa with the average cost of acquisition at Rs 9.9, as per data compiled by JM Financial.

Sunil Kant Munjal, one of the founder-promoters of Hero Group, holds a 3 percent stake with shares acquired at Rs 56.5 apiece. This indicates that he is sitting on 21x returns.

The company’s founder and chief executive officer Falguni Nayar said HNIs tend to be long-term investors.

“But we won’t be able to speak on their behalf and we are not privy to the decision they make,” she said when asked whether pre-IPO investors would hold their stakes or sell.

Private equity funds

While private equity funds had acquired stakes at a higher price than HNIs, they, too, are enjoying significant gains on their investments even though their profits have come down considerably.

Nykaa’s 52-week high was Rs 2,573, hit on November 26, 2021.

Steadview Capital and Fidelity Securities, with current shareholding at 3.5 percent and 1.3 percent, respectively, are looking at 5.8x returns on their investment. The firms acquired shares at Rs 202 apiece.

Lighthouse India Fund’s cost of acquisition at Rs 76.7 indicates 15x returns. The fund’s shareholding in Nykaa stands at 2 percent. TPG Growth had acquired shares at Rs 117.7, and it is sitting on 10x returns.

During the initial public offering, TPG and Lighthouse India had sold a part of their stakes in the company. Munjal, Harindarpal Singh Banga, along with Indra Banga, Sekhsaria and Rishabh Mariwala, were also among the sellers.?

Last year, the Rs 5,352-crore public issue saw a huge demand and was subscribed 81.78 times. The price band was fixed at Rs 1,085-1,125 per equity share and the stock made a stellar debut at Rs 2,018 at a 79 percent premium. Since then, the stock has sunk 45 percent.