Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

FSN E-Commerce Ventures (Nykaa) / Equity Capital Markets

FSN E-commerce (Nykaa) aims to raise around US$550m, via selling a mix of primary and secondary shares in its Indian IPO. Nykaa is a lifestyle focussed e-commerce platform and consumer brand offering a portfolio of beauty, personal care and fashion products, including its own branded products. As per RedSeer, it was the largest Specialty Beauty and Personal Care Platform in India in terms of value of products sold in FY21.As of March 21, it had 43.7m cumulative downloads across all its mobile applications. Its offline channel comprises 73 physical stores across 38 cities in India. It reported a gross merchandise value (GMV) of INR40,459.8m (around US$550m) in FY21. As of Mar 21, it offered approximately 2.0m SKUs from 3,826 national and international brands across its business verticals. Nykaa’s GMV, revenue and gross profit have more than doubled over FY19-21, even though the company suffered from a drop in orders due to COVID-19 in 4Q20 and 1Q21. Overall, GMV grew by 62.7% in FY20 and 50.7% in FY21. Revenue growth has broadly kept pace with GMV growth while the company has managed to turn a profit in FY21. However, the growth for its largest segment, beauty and personal care, appears to have slowed down in FY21. While its fashion segment is operated as a marketplace and hence, won’t be a big driver of revenue growth till it scales.

FSN E-commerce (Nykaa) aims to raise around US$550m, via selling a mix of primary and secondary shares in its Indian IPO. Nykaa is a lifestyle focussed e-commerce platform and consumer brand offering a portfolio of beauty, personal care and fashion products, including its own branded products. As per RedSeer, it was the largest Specialty Beauty and Personal Care Platform in India in terms of value of products sold in FY21.As of March 21, it had 43.7m cumulative downloads across all its mobile applications. Its offline channel comprises 73 physical stores across 38 cities in India. It reported a gross merchandise value (GMV) of INR40,459.8m (around US$550m) in FY21. As of Mar 21, it offered approximately 2.0m SKUs from 3,826 national and international brands across its business verticals. Nykaa’s GMV, revenue and gross profit have more than doubled over FY19-21, even though the company suffered from a drop in orders due to COVID-19 in 4Q20 and 1Q21. Overall, GMV grew by 62.7% in FY20 and 50.7% in FY21. Revenue growth has broadly kept pace with GMV growth while the company has managed to turn a profit in FY21. However, the growth for its largest segment, beauty and personal care, appears to have slowed down in FY21. While its fashion segment is operated as a marketplace and hence, won’t be a big driver of revenue growth till it scales.

FSN E-Commerce (Nykaa) Pre-IPO - Mixed Bag - Fashion Growing, Beauty Slowing

Indian Accounting Research Analyst, Trudence Capital Advisors

Nitin Mangal

Indian Accounting Research Analyst

Trudence Capital Advisors

Trudence Capital Advisors Private Limited is a SEBI-registered Research Analyst, holding SEBI registration number INH000015747. Our firm is dedicated to providing independent and unbiased research on Indian mid to large-cap companies. Trudence Capital is known for its counter-consensus views, with a focus on forensic research and on-ground primary investigations. Our research approach is thorough, involving detailed analysis of accounting practices and governance, alongside extensive channel checks.

Independent & Unbiased Research

We continue our focus on the coverage of IPO bound start-ups and next is none other than <a href="https://www.smartkarma.com/entities/fsn-e-commerce-ventures-nykaa" target="_blank" data-smartkarma-citation="entities:33796:1" rel="noopener">FSN E-Commerce Ventures (Nykaa) (1003622D IN)</a>. However, Nykaa stands apart from the rest since it is the one of those rare finds that have a positive profitability and this is why it looks promising in nature. Another differentiating aspect is that Nykaa operates as an omni-channel entity, having as many as 73 physical stores across the country. (However, most of the revenue is generated online).Nykaa was founded only in 2012 and has gained a strong foothold in the beauty and personal care (BPC) space especially in the last few years. According to RedSeer, the company is the largest Specialty BPC platform in India in terms of value of products sold in F21. The company manages its BPC predominantly through inventory model, not to forget that it also has its own brands which it outsources the manufacturing. Nykaa has also started the ball rolling in the fashion territory in 2018, for which it mostly acts as a market place for its consumers and vendors.Nykaa has a strong operational characteristics, there is hardly any doubt; however, one needs to look beyond it to get a more comprehensive view of the financials and governance. There are a few concerns on the accounting front that should not be overlooked. We also find stains on the governance, primarily related to remuneration of MD. Further, there were several small risk factors which were disclosed, that had acted as a resistance force in the past.

We continue our focus on the coverage of IPO bound start-ups and next is none other than FSN E-Commerce Ventures (Nykaa) (1003622D IN). However, Nykaa stands apart from the rest since it is the one of those rare finds that have a positive profitability and this is why it looks promising in nature. Another differentiating aspect is that Nykaa operates as an omni-channel entity, having as many as 73 physical stores across the country. (However, most of the revenue is generated online).Nykaa was founded only in 2012 and has gained a strong foothold in the beauty and personal care (BPC) space especially in the last few years. According to RedSeer, the company is the largest Specialty BPC platform in India in terms of value of products sold in F21. The company manages its BPC predominantly through inventory model, not to forget that it also has its own brands which it outsources the manufacturing. Nykaa has also started the ball rolling in the fashion territory in 2018, for which it mostly acts as a market place for its consumers and vendors.Nykaa has a strong operational characteristics, there is hardly any doubt; however, one needs to look beyond it to get a more comprehensive view of the financials and governance. There are a few concerns on the accounting front that should not be overlooked. We also find stains on the governance, primarily related to remuneration of MD. Further, there were several small risk factors which were disclosed, that had acted as a resistance force in the past.

Asia Consumer Research, Investory

Devi Subhakesan

Asia Consumer Research

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

In this insight, we discuss how and why the growth outlook for the online food delivery sector in India is not as robust as online consumer retail - a fact that Zomato's buoyant valuations seem to overlook. Food delivery players like <a href="https://www.smartkarma.com/entities/zomato-media-pvt" target="_blank" data-smartkarma-citation="entities:28820:1" rel="noopener">Zomato (ZOM IN)</a> can tap into only a fraction of India's rising e-Comm user base in the next several years and hence are not the best plays on India's expanding online shopper base. India's low urbanization rate, restrictive social factors, and high level of income inequality limit the penetration rate for food delivery platforms like Zomato and thus impact their pace and potential for growth in the near-to-medium term vis-a-vis online retail tech platforms. Investors need to be cognizant of these restrictive macro factors while assessing this IPO's investment worth and valuation assumptions.Zomato's IPO has received the regulator's approval and is priced at Rs72 - 76 indicating a steep increase in valuation versus its last round of fundraising in February 2021. At the upper-end, Zomato will now be valued at USD8Bn+ versus USD5.2 Bn in Feb 2021. We suspect the street's excitement over this USD1.2 Bn+ IPO is likely driven by bullish growth expectations based on India's expanding online user base as well as the brand's high visibility and recall. We believe upcoming IPOs in the online retail sector like <a href="https://www.smartkarma.com/entities/flipkart-online-services-private-limited" target="_blank" data-smartkarma-citation="entities:31076:1" rel="noopener">Flipkart, </a><a href="https://www.smartkarma.com/entities/nykaa-e-retail-pvt-ltd" target="_blank" data-smartkarma-citation="entities:33469:1" rel="noopener">Nykaa E-Retail </a>could offer a more direct investment opportunity to ride the growth in India's rising online spending.Our earlier report <a href="https://www.smartkarma.com/insights/zomato-s-usd-1bn-ipo-india-foodtech-s-lead-play-striking-when-the-market-is-covid-hot" target="_blank" data-smartkarma-citation="insights:50874" rel="noopener">Zomato's USD 1Bn IPO: India Foodtech's Lead Play. Striking when the Market Is COVID-Hot.</a>discussed Zomato's business basics.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/217/484/original/Screenshot+2021-07-08+at+6.24.44+PM.png?1625741192" class="editor-image img-responsive" data-smartkarma-image-id="217484"></figure></section>

In this insight, we discuss how and why the growth outlook for the online food delivery sector in India is not as robust as online consumer retail - a fact that Zomato's buoyant valuations seem to overlook. Food delivery players like Zomato (ZOM IN) can tap into only a fraction of India's rising e-Comm user base in the next several years and hence are not the best plays on India's expanding online shopper base. India's low urbanization rate, restrictive social factors, and high level of income inequality limit the penetration rate for food delivery platforms like Zomato and thus impact their pace and potential for growth in the near-to-medium term vis-a-vis online retail tech platforms. Investors need to be cognizant of these restrictive macro factors while assessing this IPO's investment worth and valuation assumptions.Zomato's IPO has received the regulator's approval and is priced at Rs72 - 76 indicating a steep increase in valuation versus its last round of fundraising in February 2021. At the upper-end, Zomato will now be valued at USD8Bn+ versus USD5.2 Bn in Feb 2021. We suspect the street's excitement over this USD1.2 Bn+ IPO is likely driven by bullish growth expectations based on India's expanding online user base as well as the brand's high visibility and recall. We believe upcoming IPOs in the online retail sector like Flipkart, Nykaa E-Retail could offer a more direct investment opportunity to ride the growth in India's rising online spending.Our earlier report Zomato's USD 1Bn IPO: India Foodtech's Lead Play. Striking when the Market Is COVID-Hot.discussed Zomato's business basics.

Zomato IPO: Floating High Above Sector Reality. Not a Linear Play on India's Rising EComm User Base

India

FSN E-Commerce Ventures Private Limited providese-retailing beauty and personal care solutions. The Company offers comprehensive selection of makeup, skin and hair care, bath body, fragrance, grooming appliances, personal care, and health and welness categories. FSN E-Commerce Ventures serves customers worldwide.

FSN E-Commerce Ventures (Nykaa) (NYKAA IN)

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FSN E-Commerce Ventures (Nykaa) (NYKAA IN)

FSN E-Commerce (Nykaa) Pre-IPO - Mixed Bag - Fashion Growing, Beauty Slowing

FSN E-commerce (Nykaa) aims to raise around US$550m, via selling a mix of primary and secondary shares in its Indian IPO.

Sumeet Singh

Nykaa IPO: Not Perfectly Elegant

Nykaa has a strong operational characteristics, there is hardly any doubt, but concerns on the accounting front that should not be overlooked,...

Nitin Mangal

Zomato IPO: Floating High Above Sector Reality. Not a Linear Play on India's Rising EComm User Base

IPO valuations ignore that the growth outlook for the online food delivery sector in India is not as robust as online consumer retail. Projections...

Devi Subhakesan

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