FSN Ecommerce (Nykaa)

about 2 years ago
FSN Ecommerce

Rs. 5,352 cr IPO -

  • 88% of the IPO is offer for sale (OFS) by promoters, PE investors TPG, Lighthouse, JM and a clutch of HNI investors.
  • Rs. 630 cr is fresh issue for (i) customer acquisition through brand building Rs. 234 cr (ii) Rs. 156 cr debt repayment, of total Rs. 268 cr (iii) Rs. 42 cr for new retail stores (iv) Rs. 42 cr new warehouses, to augment present 6 lakh sq ft capacity by 66% till FY24.

Price band: Rs.1,085 – 1,125 per share

Mcap: Rs.53,200 cr, implying 10% dilution

IPO Date: Thu 28 Oct to Mon 1 Nov, 2021, listing on 11 Nov 2021

Grey Market Premium (GMP) of FSN Ecommerce/ Nykaa: It is an unofficial figure, against guidelines of SEBI and we are strongly against it. Know more about ‘grey market premium’ in our detailed article.


Company Strengths:

  1. Inventory-led business model for beauty retailing over market place model for competition ensures authentic products, building customer trust and stickiness.
  2. High Growth: In covid year, revenue grew 38% YoY to Rs. 2,441 cr in FY21, even as lockdown impacted Q1 sales. For Q1FY22, revenue grew to Rs. 817 cr, as fashion business ramped-up. Since H2 is stronger than H1 and company prioritises growth over margins, high growth sustainable.
  3. Efficient Capital Deployment: Pre-IPO equity base is low at Rs. 47 cr (FV Re 1) with net worth of Rs. 700 cr. Company has only raised about Rs. 600 cr in primary capital and clocked Rs. 2,441 cr revenue in FY21, implying an impressive capital turnover ratio of 4.2 times (Dmart capital turnover of 2x). Thus, leverage of technology helped scale up the business.



  1. Highly Competitive Fashion Segment: Leadership in beauty business may be difficult to replicate in fashion, due to high competitive intensity, low customer stickiness and price sensitive nature of market.
  2. Pressure on Profitability: 7% EBITDA margin clocked for FY21, as marketing spends were low amidst the pandemic. But, as customer acquisition expenses rose, Q1FY22 EBITDA margin slipped to 4%. Thus, FY21’s 62 cr PAT may not be maintained in short term. 
  3. Valuation a Mixed Bag: No direct peers, but traditional retailer Dmart, with 8% EBITDA margin and 20% topline growth, is trading at 10.5x current year revenue multiple, which is quite stretched, as FMCG major HUL is ruling at 11x revenue, with 25% EBITDA margin. In this backdrop, Nykaa’s FY22E revenue multiple of 14x appears high. On FY23E revenue multiple of 10x though, it is ok, given tech platforms IRCTC and Indiamart are trading at FY23E multiples of 23-24x, on higher profit margin but lower topline growth. 


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