Nykaa gains 3 percent after large block deal

Shares of Nykaa owner FSN E-Commerce Ventures rose 3 percent on Friday after bulk deals totaling 6.57 million shares or 0.23 percent equity worth Rs 93.2 crore at Rs 141.90 apiece.

The buyers and sellers were not known immediately. The stock has been under pressure since pre-IPO investors started exiting the company after the end of the lock-in period on November 9, 2022.

Earlier, Lighthouse India sold around 18.45 million shares worth Rs 336 crore, Kravis Investment Partners sold around 36 million shares worth Rs 630 crore and TPG liquidated around 5.43 crore shares for Rs 998 crore.

Recently, brokerage firm Nomura reiterated its “buy” rating on Nykaa with a target price of Rs 214, an implied upside of 53 percent over the closing price on March 17.

Also Read: Nomura reiterates buy on Nykaa; sees 56% upside

“Consumption in India is going through a slowdown. However, given the low penetration rate of beauty products and low ticket size, we think the impact will be quite low on Nykaa. We factor in a revenue CAGR of 27%  over FY23-28F and margins to expand to ~12% by FY28F,” the brokerage said.

Research firm Macquarie, which initiated coverage on Nykaa recently, however, is not so optimistic. It expects competition to intensify for the company with the entry of new players like Tira by Reliance Retail and Tata Cliq.

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The brokerage sees a difficult path to profitability with Nykaa entering the business of serving small mom-and-pop stores, and competing with a well-oiled distribution network that comes with a very thin margin. It has given the stock an underperform rating at a target price of Rs 115, implying a downside of 18 percent.

Nykaa’s market capitalisation has declined 36 percent in the last six months and 64 percent since its listing in November 2021.

On March 17, the scrip closed 1.38 percent higher on the NSE at Rs 140, while the benchmark Nifty50 closed 0.67 percent up at 17,100.05 points.

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