Thread by @shyamsek

This is for #Nykaa investors.
Assume you hold 100 Nykaa shares from the #IPO.
The IPO price was 1125.
A 5:1 bonus was issued.
Today you own 600 shares.
The cost of your original 100 shares will be your IPO purchase price.
If you sell now at 175, let's see the overall impact. 1/n

First , let us see the tax impact.
Your original 100 shares cost ₹1125.
IPO listing date was November 11, 2021. Share allotment date was between November 1 and 8, 2021.

If you sold your original 100 shares at ₹175, you attract a long term capital loss of ₹950. #Nykaa 2/n

Now to the bonus shares of 500. The cost of these 500 shares will be zero.
When you sell them within a year from the allotment date of the bonus shares, you will attract a short-term capital gains tax of 15%.

In reality, you never made a profit. You actually made ₹75 loss. 3/n

Assume you sell bonus shares for ₹225.On bonus shares, you pay a tax of ₹168.75. On the original IPO allotted shares, your L.T loss reduces to ₹900 if you sell them at 225.

You still pay ₹168.75 STCG.

But, how much profit did you actually make from the #Nykaa #IPO? 4/n

So if you exit #Nykaa fully at ₹225, you create LT loss of ₹900 to be adjusted against profits ( not sure if retail investors have LTCG to adjust). And you pay ₹168.75 taxes( not including any surcharge).
Net-Net, you realise ₹1350, which drops to ₹1181.25 post tax. 5/n

So what's so odd about board's bonus decision?
First, the intent.
Second, the timing.
The timing raises serious doubts on the intent.
What has #Nykaa achieved in its biz to reward shareholders within a year of listing?
Why did board push a bonus that hurts retail investors? 6/n

Clearly, #Nykaa fails the smell test. When a Co with founders from investment banking industry does this, it is like a 9/11 fire alarm for corporate governance in India.
Clearly, the independent directors have failed in their duty. Shareholders are victims. Alarm must ring. 7/7.