IPO Analysis : FSN E-Commerce Ventures Ltd. ( Nykaa)

IPO Analysis : FSN E-Commerce Ventures Ltd.( Nykaa)

Incorporated in 2012, Nykaa is a digitally native consumer technology platform, delivering a content-led, life style retail experience to consumers. It has a diverse portfolio of beauty, personal care and fashion products, including own-brand products manufactured by the company. 

Its business verticals include, 

(a) Nykaa: Beauty and Personal Care and 
(b) Nykaa Fashion: Apparel and Accessories.

As of 31st August 2021, Nykaa had ~3.1m SKU offerings from 4,078 national and international brands across business verticals. Its total GMV for FY21 grew at 50.7% YoY and stood at INR40.5b/USD550m, while its revenue grew at 38.1% YoY to INR24.4b/USD334m.

Its online channels include mobile applications, websites, and mobile sites. According to the RedSeer, Nykaa had one of the highest share of mobile application-led transactions, among the leading online retail platforms in India during FY21 and 5MFY22. As of August 31, 2021, cumulative downloads stood at of 55.8 million across all mobile applications and during 5MFY22, 88.2% of online GMV came through mobile applications. The offline channel comprised 80 physical stores across 40 cities in India over three different store formats as of 31st August 2021. Physical stores offer a select offering of products as well as a seamless experience across the physical and digital worlds.

Nykaa has a portfolio of 13 owned brands, which play a key role in increasing the assortment of products for consumers. The owned brand portfolio is executed by identifying the gaps in the market – across both the requirements of diverse consumers and multiple price points – and building brands to suit these needs, with a focus on high-quality products. 

Some of these owned brands include, 

(a) Nykaa Cosmetics: a comprehensive make-up and beauty accessories brand, (b) Nykaa Naturals: a naturally derived ingredients focused brand for skincare products, 

(c) Kay Beauty: offers premium-range beauty products, 

(d) Twenty Dresses: This Apparel product line includes western wear as well as footwear, bags, and accessories categories, 

(e) Nykd by Nykaa: offers lingerie and 

(f) Pipa Bella: offers on-trend aesthetic jewellery.

Competitive Strengths:

•     One of India's leading specialty beauty and personal care companies.
•     Major brands offering their products on Nykaa's platform for sale
•     Capital efficient business with strong growth and profitability
•     Company's advanced technology platform
•     Founder-led company with an experienced management team

Financial and Valuation:

Peer Comparison with Listed Digital platforms: 

Business Model: 

Risk & Concerns:

• The competitive advantage for Nykaa’s strategies to venture into fashion and other adjacent businesses is unclear, particularly amid the intense competition from other players and horizontal marketplaces. The move is especially puzzling given the massive opportunity in the BPC space and Nykaa’s dominant position.
• As Nykaa’s BPC business grows, its strategy of working with an inventory model could possibly become a hindrance given the large investment in inventory that will be needed.
• Given Nykaa’s success, new entrants could pursue the opportunity and enter the market using a similar inventory-led business model, thus eating into the company’s market share.
• With a multi-faceted reliance on its technological ability to offer better product discovery and a unique customer journey, Nykaa will be challenged by competition to continually build upon and improve its technology stack to maintain its lead.
• Nykaa’s store expansion strategy will play a crucial role in strengthening its pole position in a rapidly growing market. It will have to deal with various aspects including identifying optimal locations, negotiating with landlords, ramping up inventory, and identifying the right partners, among others – any of which could act as hurdle to its ambitious scale up plans.

Important Dates to Remember:

Conclusion: 

It is recommended to apply in this IPO for listing gains only. Because this company has reported profit after tax during last FY only, before that it was incurring losses. But margins are improving, due to which we may see increase in profitability. 

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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Stocks to Buy Before Diwali 2021

Stocks to Buy Before Diwali 2021

State Bank of India (SBIN)

CMP: 512 (As on 01:00 PM 28-10-2021)

Buying Range : 503-490

SL: 450

Target : 600

Upside: 19%

Rollover has been intact at 93% from the last 2 months which indicates longs are upright in the stock with more than 10% price increase in the October series. Good PSU bank to buy and hold for long term also.

Conclusion: 

• SBI is trading above triangle breakout zone. taking support at 100 DMA.
• It is sustaining above the breakout zone and started the next leg on the upside indicating strength
• RSI oscillator is placed in the bullish zone which will support the up move.
• Short term and long term chats looks strong.
• Considering the current chart structure, we expect the stock to inch higher towards 600 levels
• Hence we advise to buy the stock in the range of 503-490 with a stop loss of 450

Larson & Tubro (LT)

CMP: 1831 (As on 01:00 PM 28-10-2021)

Buying Range : 1800-1760

SL: 1600

Target : 2200

Upside: 23%

Maximum Call OI is seen at 1900 and highest Call writers unwinding in this strike

is making it a comfortable upside. Short covering seen in the October series so

far will drive the stock to higher zones.

Conclusion:

• L&T has given a breakout of the Inverse Head and Shoulder pattern on the weekly scale which has bullish implication
• It is continuously forming higher-highs and higher-lows on the weekly charts indicating positive structure
• RSI oscillator is positively placed indicating strength in the counter for higher level
• Considering the current chart structure, we expect the stock to inch higher towards 2200 levels
• Hence we advise to buy the stock in the range of 1792-1760 with a stop loss of 1600

BATA India (BATAINDIA)

CMP: 1959 (As on 01:00 PM 28-10-2021)

Buying Range : 2022-1980

SL: 1800

Target : 2450

Upside: 21%

Short covering is seen with increase in price by almost 18% in the October series

and increase in implied volatility indicating bulls to be in action.

Conclusion:

• Bata India has given a strong breakout on the weekly charts
• The stock is tagging the upper Bollinger band which indicates strength in the counter
• RSI oscillator on the daily, weekly and monthly charts are positively placed which will take prices higher
• Considering the current chart structure, we expect the stock to continue to its up move towards 2450 levels
• Hence we advise to buy the stock in the range of 2022-1980 with a stop loss of 1800

Tech Mahindra (TECHM)

CMP: 1530(As on 01:00 PM 28-10-2021)

Buying Range : 1517-1480

SL: 1350

Target : 1850

Upside: 22%

OI shedding by almost 9% with increase in price which suggests shorts are covering their position and rollover of 97% in the previous series indicating positive sentiment and strong hands in the counter.

Conclusion:

• TechM has formed a strong base near 50 EMA after a long consolidation on the daily scale which is a positive sign
• It has given a fresh breakout on the daily charts indicating buying interest in the counter
• RSI oscillator on all the time frames are well placed in the bullish territory which indicates strong momentum to continue
• Considering the current chart structure, we expect the stock to inch higher towards 1850 levels
• Hence we advise to buy the stock in the range of 1517-1480 with a stop loss of 1350

Disclaimer : Above stocks are suggested based on internal study. One can look to buy these stocks after analyzing risk and by taking advice form their financial advisor. 

Happy Profitable Diwali

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Monetary Policy Review : October 2021

Monetary Policy Review : October 2021

The Monetary Policy Committee (MPC) today unanimously voted to keep the policy Repo Rate unchanged at 4.0% respectively.  It also voted in favor to continue with accommodative stance (with 5 to 1 majority, same as last meeting) as long as necessary to revive and sustain growth on a durable basis  and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.  

In addition to above, Reserve Bank of India (RBI) announced following liquidity and regulatory measures: 

• Announced  calibrated  increase  in  quantum  of  VRRR  auctions  to  INR  6  lakh  crore  (from  INR  4  lakh crore) in four tranches of INR 50,000 crore each over next 2 months. Governor also mentioned that RBI may consider complementing this with 28-day VRRR auctions in a similar calibrated manner.  
• Extended  the  On  Tap  Special  Long-Term  Repo  Operations  for  Small  Finance  Banks  of  INR  10,000 crore till 31 December 2021.  
• Extended the enhanced aggregate Ways and Means Advances limit for States / Union Territories of INR 51,560 crores by another 6 months till 31 March 2022. 

On Economic Growth: The economic recovery is progressing well supported by receding cases, easing restrictions  and  improvement  in  pace  of  vaccination.  The revival  has  been  broad  based  with  improvement  in  PMIs, steady  growth  in  industrial  production,  forecast  of  strong food  grain  production,  robust  non-oil  non-gold  exports. 

Further, high frequency indicators like cement production, railway  freight  traffic,  e-way  bills,  power  generation,  etc.  also points at fast pace normalization. However, select segments like contact intensive services, aviation etc. continue to remain  under pressure. While Q1FY22 GDP growth  came in slightly lower  than estimated,  RBI  has  retained  the  full  year  growth  forecast  and  has  revised  up  its  growth  estimate  for Q2FY22 and Q3FY22. However, RBI continues to emphasis the need to nurture the recovery given the relatively  low  capacity  utilization,  uncertain  external  sector,  high  commodity  prices  and  impact  of monetary policy normalization in advanced economies.

On  Inflation:  The  average  inflation  for  July  and  August  2021  has  been  considerably  lower  than  RBI’s  forecast.  This  was  mainly  driven  by  soft  momentum  in  vegetable  prices  and favourable base effect. However, fuel prices inched up further on back of rise in international crude prices and core inflation (CPI ex food & fuel) continues to remain sticky and at elevated level. 

In view of lower food inflation,  expectation of record food grain production, supply side measures by government on edible oil and pulses,  lower pass through  of  high  input  prices,  etc.  RBI  has  revised  down  its  CPI  forecast  by  80  bps  for  Q2FY22  and Q2FY23. Consequently, the full year target has been revised down by 40 bps.

Conclusion and Outlook 

The  status  quo  of  monetary  policy  and  increase  in  VRRR  quantum  was  largely  in  line  with  consensus expectations and there was no major surprise in the policy. However, no new G-SAP announcement for 

Q3FY22  was  perceived  a  little  negative  by  the  market  and  yields  at  the  longer  end  inched  up  slightly.  However,  Governor  in  his  statement  stressed  that  RBI  retains  the  flexibility  of  conducting  G-SAP  and  using  other  liquidity  tools  including  operation  TWIST  and  OMOs  as  and  when  deemed  necessary. 

Governor  reemphasized  that  increase  in  quantum  of  VRRR  should  not  be  perceived  as  reversal  from accommodative stance. RBI expects that the inter bank liquidity (excluding the VRRR) is likely to remain in the range of INR 2 to 3 lakh crore by early December 2021 i.e. ~2% of NDTL from ~4.5% currently.  

Going forward, the fixed income market can face some headwinds as factors like elevated crude prices, resilient  retail  inflation,  increase  in  inflation  expectations,  high  SLR  holding  of  banks,  good  recovery 

momentum,  etc.  may  adversely  impact  the  yields.  Further,  hawkish  commentary  by  US  FOMC,  rise  in international commodity prices, etc. can put upward pressure on Gsec yield too.  

However, despite the fixed income environment being not so favourable over the past few months, the rise  in  yields  has  been  rather  modest  till  now,  primarily  driven  by  continued  RBI  intervention  through 

deployment  of  conventional  and  unconventional  tools.  Over  the  past  one  and  half  year,  RBI  has extensively  used  policy  tools  like  LTROs,  TLTROs,  operation  TWIST,  G-SAP, etc. to achieve “orderly 

evolution” of yield curve. Further, the buoyant revenue collections have reduced the risk of fiscal slippage. Also, borrowing for compensation cess has been subsumed within the Government borrowing program and there is likely to be no increase from budgeted borrowing program.  

In view of the above, we expect yields to trade within a range with an upward bias. However, given the increase  in  VRRR  quantum  and  possibility  of  reverse  repo  rate  hike  in  coming  months,  we  expect  the yields at shorter end to rise faster. In view of the aforesaid and relatively steep yield curve, we continue to recommend investments into short to medium duration debt funds, possibly, in a staggered manner 

in line with individual risk appetite.

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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What is meant by DVR shares?

What is meant by DVR shares?

A DVR is an abbreviation of Differential Voting Rights. It is like an ordinary equity share which provides fewer voting rights to the shareholders. As compared to the ordinary equity shares, DVR shares can have a higher or a lower voting right. But as per Indian regulation, companies are not allowed to issue equity shares with higher voting rights, resulting lower voting rights in DVR shares in India when compared to ordinary shares.

The basic difference between DVR shares and Ordinary shares is with respect to voting rights. Also, DVR shares receive higher dividend.

These shares are listed on stock exchange and are traded the same way as ordinary shares are traded, but DVR are mostly traded at a discount.

Tata Motors, Pantaloon retail, Gujarat NRE Coke are some of the Indian companies that have issued differential voting rights shares.

Benefits to the investors on buying DVR Equity Shares:

• Apart from voting rights, a shareholder will get all other rights intact such as bonus shares, right share issue, etc.
• DVR shares are usually offered at a discount when compared to ordinary shares, therefore less investment amount is required.
• Generally higher dividend is paid in DVR shares than in regular equity shares.

Why companies issue DVR shares?

Currently there are very few companies who have issued DVR shares. Now, let us see the advantages to the companies who issue DVR shares:

• By issuing DVR shares, company can decide on how much of its powers to dilute, also the company can retain control and raise money.
• The company can choose on how much voting rights to be given to each shareholder and what kind of shares to issue.
• It provides safeguard against hostile takeover as when equity shares are issued with voting rights, there can be a chance that investor can hold majority and takeover the control of company’s management.

Who should invest in these shares?

DVR shares offer a variation to both the investors i.e. retail investor and the institutional investor, particularly those who may not be certain about voting rights but may see the economic values in the form of high discount offer which is being made and DVR shareholders get incremental dividend.

Why retail investors should make investment?

Ideally DVR shares are good instrument for long term investors, particularly those investors who are not necessarily interested in taking a voting position but who seek higher dividend. Though, like ordinary shares DVR shares are also listed in the same way. But, DVR shares are traded at a discount as these provide few voting powers to the shareholders. Due to price differentiation of DVR shares and normal shares investors can take advantage.

Why in India DVR shares not very much popular ?

DVR share is an extremely great investing tool. For retail investor who do not attend and vote in AGMs, it is a good way to earn higher dividends as one can get DVRs at a steep discount. But, till today in India DVR shares have not yet gone in a big way as:

• In DVR shares the liquidity is an issue as institutions are not keen to participate.
• As per SEBI, DVR shareholders are not permitted to receive higher dividend than ordinary shareholders. If we see in case of DVR share issue, the dividend differential is hardly attractive which does not lead the investor to get excited about it. This is also one of the major reasons why DVRs have not really taken off in a big way in India.
• Also, without voting rights, the institutional investors are by default not willing to invest in equity.

TATA Motor DVR: 

Now lets talk about TATA motor DVR. 

Reason 1 to buy TATA Motor DVR: 

Current market Price (CMP ) of TATA Motor is Rs 509.60 (As on 18-10-2021, Closing)

CMP of TATA Motor DVR is Rs 269.75 (As on 18-10-2021, Closing)

In TATA Motor Case actual Price of DVR should be around Rs 339.733, hence right now TATA Motor DVR is trading at discount. This may act as first reason to buy this stock. 

Reason 2 to buy TATA Motor DVR: 

Trend of this is bullish i.e trading above all moving averages, with RSI above 80, though RSI above 80 is not sustainable hence investment in this stock can be done in staggered manner. While applying other indicators also it seems strength and bullish pattern, however we may see little profit booking but its ok as it will act as buying opportunity. 

Reason 3 to buy TATA Motor DVR: 

TATA Motors has laid future plan and coming up with new ( 10 Nos) Electric vehicles which will again push this stock to touch new highs. 

Conclusion: 

TATA motor DVR is a good stock for accumulation in any dip, for long term.

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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