IPO frenzy: Don't just believe in media hype, study company's journey before investing, says Zerodha co-founder Nikhil Kamath

The primary market has been buzzing with new IPOs (Initial Public Offers). Over 60 companies have hit the stock market and have been listed on the National Stock Exchange alone between November 9, 2020 and October 25, 2021. The public issues have seen massive participation for subscribers, especially retail investors, in the last one year. The surge in the participation can also be attributed to huge influx CDSL and NSDL saw in their user base during the lockdown period. The IPO frenzy have caught one and all, however, is it okay to be swayed by this wave and try luck as plenty of more IPO will hit the market by the end of this year?  

On Thursday, October 28, 2021, cosmetic e-tailer Nykaa's IPO has opened for public subscription. The IPO will conclude on November 1, 2021. Before you subscribe, Nikhil Kamath, Co-founder, True Beacon and Zerodha, has shared his words of wisdom.  

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Zerodha Co-founder is of the view that one should not blindly believe in the media hype and should do thorough research before applying for an IPO.  “As an investor, don’t believe the media hype, you need to study the company and its journey before investing in an IPO. Plenty of IPOs start out at high levels and fizzle out later," says Nikhil.    

Speaking about specialty beauty and personal care (BPC) retailer, Kamath said, "Nykaa has had a quite a journey! Key to that has been the fact that they set organization processes and standardised protocol, in the early-stage, when most startups don’t even give it a thought."

For instance, they got their inventory management in order, by tying up with suppliers exclusively (like Huda), he said. "This is the primary reason that propelled their growth to 200% YoY to 5.9mn units in the quarter or the fact that Nykaa's average orders (3190 per order) are so much higher than the industry average (1800 per order)," said True Beacon and Zerodha Co-founder.  

He also credited them for building credibility organically by launching their own label. "It’s not easy. Nykaa’s own brand made up 7.5% YTD of total revenues on a blended average basis. Their network of influencers, warehouses, and physical stores could prove to be assets if Nykaa keeps scaling up at the rate that they are. The intention seems to be to use part of the raised capital to enhance logistics and revenue centres. This shows optimism and that’s commendable,” concluded Nikhil.  

Meanwhile, Zee Business Managing Editor Anil Singhvi has recommended to apply for this issue for both good listing gains and with long-term horizon. Anil Singhvi has listed good track record growth, impressive background of promoters and cash rich profile of the company before recommending a subscribe on this profitable new age company.