Share prices of Nykaa are in a freefall. What do experts say?

Experts’ take on Nykaa’s falling share prices


The leading cosmetics and retail giant Nykaa was listed on the stock exchange in November 2021 after its IPO (Initial Public Offering). On its listing date, the stock prices almost doubled compared to their issue prices giving good returns to investors.

However, recently, the share prices have been seeing a sharp decline. This is despite an impressive financial performance in the last quarter (October-November-December). The company reported a jump in both its revenue and profits in the last quarter. However, the share prices are in a reverse trend even after a good quarterly result. Since listing, the prices have fallen 68% to date. Here are some of the major reasons why the shares are falling –

  • Liquidation pressure

The lock-in period of holding onto the shares for pre-IPO investors has ended. That is why the shares are facing liquidation pressure. Early investors like Segantii India Mauritius, Lighthouse India Fund – III, TPG, and Mala Gopal Gaonkar have sold their stakes in the company. Shares valuing more than Rs.1000 crores have been sold in the open market, which has created selling pressure causing prices to dip.

  • Resignation of the CFO

Nykaa has been a profitable company for many years, and its CFO (Chief Financial Officer) might have played the same role. However, the CFO resigned currently, shaking investor confidence and causing a negative effect on the share price.

  • Bonus shares issuance

The company announced the issue of bonus shares just after the lock-in period for pre-IPO investors ended. This was viewed as a cunning move by the company to retain the investors and affected their confidence in the company.

Related - Find out what are bonus shares

What do experts have to say on Nykaa shares?

As the share prices fall and the spotlight is on the company’s scrip, here’s what analysts believe –

  • Investors can buy the company’s stock since the prices are lower, allowing them to invest at reduced rates.
  • Given the company's financial performance, an increasing network of stores across cities and higher brand recognition, there’s sufficient room for growth. As such, investors can capitalize on the growth if they invest now.
  • Some analysts believe it's time to sell the shares since the company has a long way to go before establishing itself on the stock market.
  • If you are an existing investor, some experts believe you should hold onto your investment as the company’s various value propositions can help it grow.

So, assess your investment needs and then make a choice. If you are investing for the long run, you can invest in Nykaa’s stock, as the company has good brand recognition and growth potential. On the other hand, if you are investing for the short term, you need to be cautious as there might be volatility over the short run. Holding is a good strategy for existing investors, as you might incur a loss if you sell now. So, be mindful and make an informed decision.

Related - Here's an expert opinion on Nykaa shares' investment strategy

See this video for reasons why the share price of Nykaa is falling

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.


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