Nykaa IPO: Should investors partially book profits or hold on for now

FSN E-Commerce Ventures, the parent company of Nykaa, debuted in the stock market at Rs 2,018 apiece yesterday, commanding a premium of 79 per cent over its issue price of Rs 1,125 on the National Stock Exchange. Backed by strong investor interest, the shares scaled a high of Rs 2,248, up 100 per cent versus the issue price, in the intra-day trade.
 
They, however, ended at Rs 2,208, up 96 per cent against the issue price. The strong debut also pushed Nykaa's market capitalisation over Rs 1-trillion mark, placing it among the top-60 most valuable companies on the BSE. Meanwhile, Nykaa owner Falguni Nayar’s net worth, who owns about half of Nykaa, swelled to $6.5 billion courtesy the solid listing.
 
Going-forward, Vikas Jain, senior research analyst at Reliance Securities, suggests investors to partially book profit in the stock. He says:
 

• The stock is up over 95% compared with issue price
• Any level around Rs 2,400 will be a good exit point
• New investors should wait for earnings before taking positions

 
Jyoti Roy, DVP- Equity Strategist at Angel One, on the other hand, suggests aggressive investors to hold the stock while new investors may buy at current levels. He explains:
 

• Nykaa is trading at price-to-sales ratio of 43 times FY21 revenues
• This is a significant discount vs Zomato (54times FY21 revenue)
• Investors can buy stock at around Rs 2,200

 
Overall, as Nykaa remains one of the few profitable start-ups in India, belonging to the growing consumer Internet space, analysts expect it to be one of the greatest growth stories over the next decade. However, it needs to deliver consistently on the bourses to justify the market exuberance.
 
While for Thursday’s session, volatility may remain high amid continuous foreign fund outflow and mixed corporate earnings. Besides, scheduled weekly expiry today will also lead to choppiness through the day. Overall, as stock-specific news flow, Q2 results, and global cues will guide the sentiment in the secondary market, investors are advised to maintain extra caution in the selection of stocks and focus more on risk management. In the primary market, public offers of Sapphire Foods and Latent View Analytics will be on investor radar today.

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