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Nykaa shares recover losses, jump 3%; stock down 44% YTD, should you buy, hold or sell?

Nykaa shares jumped 3 per cent to Rs 191 on NSE. The rise in shares price comes depsite reports of American investment company TPG Capital looking to sell Rs 1,000 crore shares of Nykaa.

Nykaa shares recover losses, jump 3%; stock down 44% YTD, should you buy, hold or sell?
Nykaa shares have been under pressure since lock-in expired last week on 10 November

Nykaa shares on Friday jumped over 3 per cent to Rs 191 on NSE. The rise in shares price comes despite the American investment company TPG Capital selling 5.4 crore shares or 1.9% equity of Nykaa parent FSN E-Commerce Ventures in a block deal. Citigroup was the appointed banker for the deal. Nykaa shares have been under pressure since lock-in expired last week on 10 November. During the lock-in period, promoters and investors cannot liquidate the pre-IPO securities held by them. Stocks often fall after lock-in expires, as investor selling puts downward pressure on shares. Since the lock-in expiry, there have been multiple bulk deals in Nykaa.

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Earlier this week, Lighthouse India Fund III sold 96,89,240 Nykaa shares at an average price of Rs 171 per share. Among other major sellers, Segantii India Mauritius sold 33,73,243 shares at an average price of Rs 199 on 15 November.

“The shares prices of Nykaa declined to its all-time low before the lock-in period ended. On November 10, the Nykaa share lock-in period came to an end and stock made the all-time low on October 28. Despite the huge supply after the lock-in period ended stock is managed to hold its previous ATL which is 162.50 (13.33% down from the issue price). In July Zomato stock tanked to a record low when lock-in periods ended but currently stock is trading nearly 66 per cent up from its record low. Long term investors should hold their position with keeping SL below the all-time low and new investors should wait till prices sustain above the Rs 210,” said Akhilesh Jat, Category Manager – Equity Research, CapitalVia Global Research

It is worth noting that investors in five platform stocks including Nykaa, Paytm, Zomato, Delhivery and Policybazaar have lost over Rs 2 lakh crore since their IPOs. Paytm parent One 97 Communications has seen one of the biggest drops in its market cap since its IPO as the stock has lost 65% or Rs 66,169 crore. In value terms, Nykaa has been the biggest loser after Paytm with market cap down at Rs 51,469 crore. Analysts believe that the main reason for this massive loss are high valuations. “With anchor investors beginning to reduce their stakes in these firms, there is no one to hold on to the prices of these companies. In addition, investors are uncomfortable with continuing high rate of cash burn,” a mutual fund manager told FE.

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“A significant trend in the market now is the bloodbath in the new-age digital companies triggered by the end of the lock-in period for initial institutional investors. Some of these stocks may turn out to be big wealth creators in the long run. Long-term investors with high-risk appetite may consider nibbling at some of these stocks now available at huge discounts to their IPO price,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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First published on: 18-11-2022 at 09:33 IST