Why Nykaa Shares Have Plunged Nearly 20% in 4 Days

 

• Stocks often fall after the lock-up ends, as investor selling puts downward pressure on stocks. Shares of Nykaa were down nearly 4% today

Shares of FSN E-Commerce Ventures Ltd, owner of beauty e-retailer Nykaa, have been under pressure since the lock-up ended last week. Shares of Nykaa fell 4% to ₹171 at the day's low, taking the four-day loss to nearly 20%. According to NSE data, Lighthouse India Fund III Ltd sold 96,89,240 shares at an average price of ₹171 per share on November 10. Among other top sellers, SEGANTII India Mauritius sold 33,73,243 shares at an average price of ₹199 on Nov 15.

Stocks often fall after the lock-up ends, as investor selling puts pressure on the shares. Food-delivery company Zomato Ltd fell to a record low in July after the lock-up on its shares expired. Ever since Nykaa's bumper market hit in November last year, its shares have fallen below their IPO price.

Nykaa's gross merchandise value (GMV), or the monetary value of orders on its platform, grew 45% to Rs 23.46 billion. GMV from its fashion business grew by 43%, while that from its core beauty and personal care business grew by 39%. The company in October tied up with Dubai-based lifestyle and fashion conglomerate Apparel Group to expand in the Gulf region.

Commenting on the selling pressure in internet stocks, VK Vijayakumar, chief investment strategist at Geojit Financial Services, said there is now high activity in some of these stocks where the lock-in period of early investors is coming to an end. There is huge supply and high volatility in their stock prices. Some like Nayaka are beneficial. Some of these stocks have a long runway of potentially high growth over several years. Some of them can become huge wealth creators in the long run. Hence, this segment can be keenly watched."

Meanwhile, shares of Paytm's parent company One97 Communications Ltd fell 10% today after a unit of Japan's SoftBank Group Corp offered to reduce its stake in the company. About 29.5 million shares, equivalent to 4.5% of Paytm shares, were traded in a block on the National Stock Exchange, according to data compiled by Bloomberg.



In the September quarter, Nykaa reported a net profit of around ₹5 crore, which was helped by strong demand in the festive season. Revenue grew by 39% to ₹1231 crore.