Nykaa board approves 5:1 bonus issue; share surges 11%

Shares of e-commerce company FSN E-Commerce Ventures Ltd (Nykaa) jumped over 11% in intraday trade on Monday after its board approved bonus shares in the ratio of 5:1 i.e. five bonus shares for every one share held in the company. This would be the first bonus issue by the beauty and fashion e-retailer after it made its debut on the domestic bourses on November 10, 2021.

“The board approved bonus issue of equity shares in the proportion 5 fully paid-up equity share of ₹1 each for every 1 fully paid-up equity shares of ₹1 each held by the shareholders of the company as on the record date, subject to shareholders’ approval by way of postal ballot,” Nykaa said in an exchange filing today.

As per the release, the record date for the purpose of determining members eligible for bonus equity shares is November 3, 2022.

The bonus issue is likely to increase liquidity in its stock and woo investors to invest in the company. After a blockbuster listing in November last year, shares of Nykaa have failed to attract stock market investors, with the stock currently trading 45% lower than its all-time high of ₹2,574 touched on November 26, 2021. The share price of the e-commerce company hit its 52-week low of ₹1,208.40 on May 12, 2022.

On Monday, Nykaa shares opened a tad higher at ₹1,275 against the previous closing price of ₹1,272.1 on the BSE. During the session so far, the stock gained as much as 11.2% to hit an intraday high of ₹1414.

At the time of reporting, the largecap stock was trading 6.4% higher at ₹1,353.20, while the BSE benchmark Sensex was quoting at 57,070, down 356 points, or 0.6%. The counter has delivered a negative return of 35% in the calendar year 2022, while it has fallen 24% in the past six months. It currently trades 20% higher than its IPO issue price of ₹1,125. 

Recently, global brokerage BofA Securities maintained its neutral rating on Nykaa with a target price of ₹1,685, citing that its cosmetics business remained steady, and margins were largely flattish. The agency in its port said that there would be limited inflation impact on the company, while its pace of margin would be slower than last year.

In the June quarter of 2022 (Q1 FY23), Nykaa reported a 33.4% growth in consolidated net profit at ₹4.55 crore, versus ₹3.41 crore in the year-ago period. Sequentially, the profit declined 47.6% from ₹8.56 crore in the March quarter (Q4 FY22). The beauty e-commerce platform’s revenue from operations jumped 40.5% to ₹1,148.4 crore in Q1 FY23, as against ₹817 crore in the same quarter last fiscal. During the quarter, Nykaa's gross merchandise volume (GMV) grew 47% YoY to ₹2,155.8 crore.