Zerodha’s co-founder Nikhil Kamath takes a dig at Nykaa valuation, as stock PE hits 1600x on stellar listing

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November 10, 2021 2:36 PM

Nykaa shares nearly doubled on listing day, rising 98 per cent to Rs 2,235 apiece from the issue price of Rs 1,125. The stellar listing sent its total market capitalisation past Rs 1 lakh crore.

Nikhil Kamath, co-Founder, Zerodha and True BeaconNikhil Kamath, co-Founder, Zerodha and True Beacon

Nykaa shares nearly doubled on listing day, rising 98 per cent to Rs 2,235 apiece from the issue price of Rs 1,125. The stellar listing sent its total market capitalisation past Rs 1 lakh crore. At a day’s high of Rs 2,235 apiece, Nykaa stock was commanding a price 1,607.9 times its FY21 earnings per share (EPS) of Rs 1.39. With the PE at usually unseen levels, Nikhil Kamath, co-founder, True Beacon and Zerodha, took a dig at Nykaa’s valuation. “Nykaa lists at 1600 times price to earnings. They sell cosmetics online, Paytm next, the best thing for a value stock investor might be to go on a really long holiday right about now,” Kamath said in a tweet.

While in terms of price to sales, the stock is trading at 42.68 times the FY2021 revenue, as Nykaa’s current market cap stands at Rs 1.04 lakh crore and the revenue for FY21 is Rs 2440 crore.

At current levels Nykaa was trading at price to sales of 38.9x of FY2021 revenue which was at a discount to Zomato (54xFY2021 revenues), Jyoti Roy – DVP- Equity Strategist, Angel One, said. “Nykaa is one of the very few profitable unicorns in India and we believe that the company is well-positioned to benefit from the exponential growth in the online beauty and fashion retailing business over the next decade. Given the discount to Zomato we would recommend investors to remain invested in Nykaa from a long-term perspective,” Roy added.

Gurmeet Chadha, Co-founder & CEO, Complete Circle Capital, said that Nykaa at 2500 crore sales is valued at 95k cr (40 times sales). Marico at quarterly sales of 2500 crore is valued at 70k crore ( 7 times sales, 10k annual revenue) and looks expensive too. We need different lenses to evaluate new age consumer Internet businesses,” Chadha said in a tweet.

Another analyst said that Nykaa is a high-growth company and in the right business where it may continue to grow in double digits for many years. The upside momentum may continue for at least 1-2 days before stabilising because valuation could be a concern after a big listing gain, however, the 2000 level could act as a support level in the near term, Santosh Meena, Head of Research, Swastika Investmart, said.

“Those who were playing for listing gain can keep a stop loss of 1950 while aggressive investors are advised to hold this stock for the long term because it is one of the few stocks in new edge companies to own into your portfolio. It is difficult to buy after a big gain at opening however fresh investors can accumulate in parts where they can buy 25℅ at the opening of what they want to invest into this stock while if it witnesses any correction towards 1800 level then they can add more,” Meena said.

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