Nykaa Founders Execute Block Deal, Offloading Shares
Shares of FSN E-Commerce Ventures, the parent company of Nykaa, experienced a notable decline on Thursday, dropping by as much as 4.5% to a low of Rs 202.25 on the Bombay Stock Exchange (BSE). This downturn followed a significant block deal involving approximately six crore shares, which accounted for about 2.3% of the company’s total equity. The decline was triggered by reports that early investors Harindarpal Singh Banga and Indra Banga are planning to sell part of their holdings in a secondary sale valued at nearly Rs 1,200 crore.
Details of the Share Sale
The planned secondary sale involves around 60 million shares, representing 2.1% of Nykaa’s equity, which will be offered at a floor price of Rs 200 per share. This price reflects a discount of approximately 5.5% compared to the stock’s closing price of Rs 211.59 on July 2. The transaction is entirely secondary, meaning no new shares will be issued, and the proceeds will go directly to the selling shareholders. Global investment banks Goldman Sachs (India) Securities and JP Morgan India are managing the sale, which is set to be executed on July 3, with settlement scheduled for the following day.
A 45-day lock-in period will be imposed on the sellers and their affiliates, preventing any further share sales during this timeframe. Retail investors will not be permitted to participate in this transaction, and distribution in the US and Canada will be limited to institutional investors in accordance with local regulations. Eligible buyers must also sign an investor representation letter as part of the process. The final share price will be determined through a screen-based mechanism based on investor demand, with order books expected to close by 7:30 am on the day of the deal.
Market Response and Institutional Interest
The stake sale comes at a time when Nykaa is experiencing renewed interest from institutional investors, indicating a gradual recovery in its stock performance. This move also reflects a strategic monetization effort by key shareholders as the company aims to enhance its profitability. Nykaa has set a target to achieve break-even for its loss-making fashion segment by FY26. This goal will be supported by improved marketing efficiency, increased sales of its own brands, and better overhead management.
Despite facing challenges, the fashion vertical reported a negative EBITDA margin of 8.3% in FY25, even while generating Rs 3,800 crore in gross merchandise value (GMV). In FY25, Nykaa’s profit more than doubled to Rs 66.08 crore, up from Rs 32.26 crore the previous year. The company’s revenue also saw a significant increase of 24.4%, reaching Rs 7,949.82 crore. Additionally, Nykaa’s customer base expanded by 28% year-on-year, surpassing 42 million, while its total GMV reached Rs 15,604 crore.
Future Outlook for Nykaa
As Nykaa navigates this period of transition, the focus remains on improving its financial performance and addressing the challenges within its fashion segment. The company’s strategic initiatives aim to enhance profitability and operational efficiency, which are crucial for sustaining growth in a competitive market. The upcoming share sale is expected to provide liquidity for the selling shareholders while also signaling confidence in Nykaa’s long-term potential among institutional investors.
With the market closely watching these developments, Nykaa’s ability to execute its plans effectively will be pivotal in shaping its future trajectory. The company’s efforts to stabilize and grow its business will be critical as it seeks to capitalize on the increasing interest from institutional investors and navigate the complexities of the retail landscape.
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