Nykaa, Paytm, Or OYO? How To Pick The Best IPO

All three companies are creating significant interest in the retail investor community

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It is raining IPOs and there are many more to come. In the next few months, we will see the IPOs of Paytm, PolicyBazaar, Star Health, Nykaa, MobiKwik and the most-awaited LIC.


While IPO investing can be a good idea in general, it can get confusing as well, especially when there are many lined up.  

People invest through IPOs either for the short term or the long term. The short term mainly focuses on capturing the listing gains. “In most cases, the IPOs, i.e., the primary market, follow the mood of the secondary market. When the secondary market is bullish, more IPOs hit the market, as promoters want to sell a part of their stake at high prices, or raise capital for operational purposes. Most of the IPOs in this bullish environment give superlative listing gains,” said Ujjwal Jain, CEO and founder, WealthDesk. 

If one is planning on holding the stock for a significant period of time, experts believe that he or she should look at the company's fundamentals such as sector analysis, financials, business model, company management, inherent risks, peer analysis, among others. “Investing in IPOs requires the same rigor as one would do while making any other investment, viz. evaluate the strength of the business and the price at which it is offered,” said Manoj Kumar, co-founder, Val-More Action Advisory.

Shirish Nadkarni, a serial entrepreneur and author of ‘From Startup to Exit’ shares with us three main things that one should look at, which are: 

  • Valuation: Is the company valued at a sales multiple that is generally consistent with similar public companies?
  • Growth rate: Generally, you want to invest in companies that are growing consistently at a 30 per cent or higher growth rate annually
  • Path to profitability: The company should be showing declining losses. It should be able to reach cash flow break-even in the next 18 to 24 months

All the three companies, OYO, Nykaa and Paytm, have created significant interest in the retail investor community. In this article, we look at some of the things that each of them offers or what gives each an edge over others, as shared by experts who keep an eye on the space.


The company is one of the leading lifestyle-focused consumer technology platforms and a preferred destination for luxury and prestige products in India for consumers. “Nykaa has a large opportunity in the beauty and personal care market that is poised to grow at 12 per cent per annum by 2025 while the fashion market is expected to grow at 18 per cent per annum by 2025,” added Nadkarni.

Experts believe that Nykaa is one of the bright spots in the e-commerce landscape, having built a profitable and capital-efficient business model. “Falguni is a great leader and having a banker at the helm has helped Nykaa to be fiscally prudent and capital-efficient - demonstrated by the fact that only a small portion of the IPO is targeted at raising capital for the company, while most of it is to give exits to investors,” said Sumir Verma, co-founder and managing director, Merisis Advisors.

Further, over the next few years, FMCG personal care space is poised to see huge growth. “Nykaa has a good customer recall. They have a very innovative marketing approach. They were the early first few who used the social media influencer marketing strategy. They are expanding aggressively into fashion now, which is a very large market as compared to D2C. Additionally, the management has been doing very well in terms of getting the right marketing strategy,” said Karan Taurani, senior vice president, Elara Capital. 

Nykaa's uniqueness lies in its ability to offer a hyper-personalized experience to consumers in a very complex Beauty and Personal Care (BPC) category through seamless management of over 256,000 SKUs and 2600+ brands, added Kumar. 

However, Taurani feels that the risk here is that the fashion segment is highly fragmented and too much discounting has to be done there. “They might end up losing on profitability because of fashion segment. Even on the D2C segment as things have transitioned towards super app there could be a challenge for Nykaa as customers may shift from one platform to another,” Taurani added.


Paytm again is a leader in the payments space with over 330 million users. Experts believe it will be very difficult for another payment network to emerge that has the coverage that Paytm has already demonstrated. “It has also added other services over such ticket booking, an e-commerce mall, and investment and wealth management services that will allow it to garner significant additional revenues over time,” said Nadkarni. 

For Paytm, its USP lies in its ability to integrate payments, credit, insurance, merchants, wealth management, e-commerce services etc. “Its rarity lies in its ability to create a 'super-app' which enables it to deliver on its exceptionalism,” said Kumar. 

Taurani believes that Paytm may not be able to do well in terms of all its offerings but has been able to attract a huge customer base, which is an edge it has. “5 to 10 years down the line, the more the traffic on your platform the better it is. It gives more monetization opportunity around advertising because advertisers will always look for eyeballs,” he said.  

Some, however, think that the super-app which has helped the company so far, may not continue to be a source of competitive advantage with times to come. “This space is strongly controlled by the government and there are many regulatory risks which may derail the company's plans. Finally, the issue of profitability needs to be addressed. So far, the company has burnt cash to build topline, but has not yet demonstrated how they will deliver a positive bottom line,” said Kumar. 


While OYO suffered a significant downturn in its business during the pandemic, it has been showing signs of a fast recovery in the recent quarters as some of its markets have opened up, says Nadkarni. “OYO has also streamlined its relationship with its hotel partners in recent quarters. It doesn’t own any hotel of its own and instead works with over 157,000 partners and helps them operate hotels, resorts and homes. It has 78 per cent repeat and organic traffic which suggests that it does a great job of servicing its customers,” he added. 

While OYO’s edge lies in its pricing, it is also a niche app with a highly fragmented market. So “It all depends on OYO’s recall. But the market is huge, especially as there is a lot of scope for digital adoption in India,” said Taurani. 

Overall, it is important to see the resilience of these companies in the long run. “Investors need to ask prominent questions such as – If a company can really sustain their core strengths in this highly competitive market? Are they technology first and can scale their technology? Is the future growth optimistic? These questions need to be looked at with a close lens comparing the marketing-led growth versus growth that can sustain through technology and product strengths,” sums up Jain.

S Shanthi

Written By

Entrepreneur Staff

Shanthi specialises in writing sector-specific trends,  interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. She is also a mom who looks forward to playing a game of cards with her tween daughter every evening after work.