Things To Know Before Applying For Nykaa IPO
INTRODUCTION: What is Nykaa IPO?
You may have come across this mobile app called "Nykaa" in your Google Play Store. It is a well-known lifestyle retailer that focuses on delivering wellness and beauty-based products through its mobile app. Under the name and style of FSN E-Commerce Ventures Limited, Nykaa has filed its DHRP with SEBI for issuance of Initial Public Offering (IPO).
INTERESTED IN NYKAA'S IPO? HERE'S WHAT YOU FIRST NEED TO KNOW:
Before you invest in an IPO, you need to understand the background of the company. i.e., it belongs to which industry. You must always read the Draft Red Herring Prospectus (DHRP) issued by the company. It gives you an insight into the company's background, its past performance, and its potential in the market. Reading the DHRP will help you understand whether the issuing company's shares are a lucrative investment. Want help to access their DHRP? Visit the official website of SEBI at https://www.sebi.gov.in/filings/public-issues/aug-2021/fsn-e-commerce-ventures-limited_51574.html.
A BACKGROUND ON NYKAA IPO –THINGS YOU MUST KNOW BEFORE APPLYING:
The announcement of the Nykaa IPO has created hype amongst the investors. To help you make a well-informed decision, here are a few things you need to know before applying for Nykaa's IPO:
· Company Profile:
FSN E-Commerce Ventures Limited ("Nykaa") is an Indian e-commerce company founded in 2012 by ex-investment banker Flaguni Nayar. The company was first incorporated as FSN E-Commerce Ventures Private Limited. It is a digital platform that features the selling of cosmetics and beauty-related products. It is a consumer-driven technology platform in the space of wellness and personal care. With nearly 1,500 brands, Nykaa has expanded to offline stores in many cities across India. Its popular fashion delivery-based app has helped grow its customer base to over 15 million users. It has helped the users to shop online in the comfort of their homes during the covid-19 induced lockdown. It is the only listed company that is engaged in the beauty and personal care segment. What started as a small start-up is today India's famous lifestyle beauty retailer.
· IPO Offer:
Nykaa plans to raise its 4,000 crores via its public offering with a 100% book-built offer. Their IPO offer comprises Fresh Shares aggregating up to ₹ 5,250 million and an Offer For Sale (OFS) by its existing selling shareholders up to 43,111,670 equity shares.
· IPO Objective:
The object behind Nykaa's IPO is to utilize the net proceeds towards creating awareness and visibility of the brand. Nykaa also proposes using the funds towards investment in subsidiaries, setting up new retail stores and warehouses and making outstanding payments towards their borrowings.
· Nykaa IPO date:
Nykaa has announced that it is ready to go public soon. They have issued a tentative IPO date. It would be the latter half of the year 2021 or the beginning of 2022.
· Industrial growth, company's strengths:
You must learn about a company's strength and its industrial growth in the market. Learning about the company's strengths will give you an insight into its plans for business expansion and how well it will work as an investment for you. With social media trends such as Instagram and Facebook, Nykaa has gained immense popularity amongst Generation Z and Millenials. The past few years have seen a significant rise in social media influencers and content creators, resulting in Nykaa's growth in the industry. The company has a physical presence of at least 73 stores across 38 cities in India. In 2021, it acquired an online jewellery company named Pipa Bella. The balance sheet of the company also reflects that it has the potential to grow. In 2019-20, the company's net profits stood at Rs. 2.31 crores.
· Risk factors:
Nykaa's business growth relies upon the e-commerce sector in India. The e-commerce sector is still in its developing stages in India. Material changes in regulations by the government will directly impact the company since it is innate to a digital platform. The age of the internet has also given rise to several e-commerce websites and shopping apps. That makes the segment more competitive. Thus, to expand its consumer base, it will have to adapt to new technology innovations and infuse creative ideas into its platform. It is crucial to understand the company's weaknesses before you invest in their IPO. Learning about their weakness or risk factors associated with them will give you a rough idea of the losses you'd have to incur in case of unfavourable market conditions.
As quoted by Warren Buffet, "An IPO is like a negotiated transaction—the seller chooses when to come to the public, and it's unlikely to be a time that's favourable to you."
However, as a means of caution, it is prudent to learn about the company in all aspects before you invest in its IPO.
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