As end of Nykaa lock-in looms, CEO says HNIs tend to remain invested for long term

Falguni Nayar, the founder and CEO of the beauty and lifestyle retail company Nykaa

With the lock-in of 16.48 crore pre-IPO investor shares in Nykaa set to expire on November 10, founder and chief executive Falguni Nayar said that high net worth individuals (HNIs), many of whom hold significant stakes in the company, tend to be long-term investors.

However, Nayar maintained that the company was not aware whether its pre-IPO investors would hold their stakes or sell.

Significant pre-IPO investors eligible to sell their shares after the lock-in ends include Harindarpal Singh Banga (6.4 percent), Steadview Capital Mauritius (3.5 percent), Narotam Sekhsaria (3.1 percent), Sunil Kant Munjal (3 percent), Mala Gaonkar (2.4 percent), and TPG Growth IV (2.3 percent).

“Many of the HNIs tend to be long-term investors. But, we won’t be able to speak on their behalf and we are not privy to the decision they make,” she said.

According to the Nykaa chief, the lock-in expiry date might have been a major reason for the company's share prices falling around 30 percent in October.

With 159.67 crore shares of new-age companies Nykaa, Policybazaar, Paytm and Delhivery due for lock-in expiry in November, analysts are of the view that retail investors should exercise caution while trading.

According to a Moneycontrol estimate, the new-age shares for which lock-in would expire in November are cumulatively worth over Rs 87,000 crore at current prices, while the combined size of their public issues was around Rs 34,600 crore.

While PE/VC shareholders may look to exit a part of their holdings, they are expected to largely stay put so as to not scare off retail investors.

Meanwhile, Nykaa’s shares bounced back on Tuesday after a 350 percent jump in September-quarter net profit, boosted by strong demand for its products ahead of the festive season.

Consolidated net profit stood at Rs 5.2 crore for the quarter ended September 30, compared with Rs 1.17 crore a year earlier. Quarterly revenue from operations recorded a 39 percent year-on-year increase to Rs 1,230.8 crore.

The shares were trading at Rs 1185.75 apiece on the BSE at end of the trading session on Tuesday, up 2.44 percent over the previous close.