JM Financial

Target: ₹1,780 CMP: ₹1,163.1

FSN E-Commerce Ventures (Nykaa) has provided strong gains to its pre-IPO investor base with a blockbuster listing last year. Despite the sharp correction seen in new age stocks globally, Nykaa’s strong growth with sustained profitability has ensured that the stock continues to trade above its IPO price of ₹1,125. With pre-IPO shareholders’ lock-in set to expire on November 10, it will be crucial to see if these investors liquidate or continue to hold for further gains. While Nykaa is certainly a differentiated play but the fact that 12 per cent+ shareholding is sitting on 100x returns might even be a reason enough for these investors to diversify their portfolio that might be overweight Nykaa. We also note that a majority of these investors did generate liquidity during the OFS and secondary sales prior to the IPO. Furthermore, 70 per cent of the share capital that is getting unlocked belongs to patient capital such as HNIs and family offices, which might not be obliged to sell due to tenure of funds. We have a ‘BUY’ rating on the stock with a Sep’23 target price of ₹1,780 and believe any short-term dip should be a great accumulation opportunity for investors looking to build long-term positions in Nykaa.