Nykaa's IPO is slated to be launched on October 28.
A 58-year old female founder flanked by her children, taking an Internet company in India public is a rare sight. It made for a striking image as Nykaa founder and CEO Falguni Nayar, accompanied by Anchit and Adwaita Nayar, spoke to journalists on October 25th, 2021 ahead of its public issue, which opens later this week.
But this is not the only factor that makes the online cosmetics and fashion retailer one of the most unique startups to be hitting the public markets in India. It is one of the only profitable unicorns going public and the only new-age firm where its promoter group still owns more than half the company. This is in fact one of the first aspects that Nayar addressed during the press conference, stating that while it was a founder-led company, (While Anchit leads the beauty e-commerce business, Adwaita leads the fast-growing fashion business), it is supported by a professional management team.
It is aiming for a valuation of $7 Billion, three times the valuation it had in June, It also increased the size of its primary issue by 20% from Rs 525 crore to Rs 630 crore. While it is looking to raise over Rs 5,000 crore overall, most of this will be paid to existing investors who are selling their stakes. The company said the increase in the size of the issue reflects business strength, as it has witnessed a recovery after the second wave of the Covid19 pandemic.
When asked about why the company chose to go public when it could have easily raised this privately amidst the current funding boom, Nayar said, "We have a large shareholding- from high net worth to funds. We had an internal path to listing and this listing gave independence to shareholders to exit and enter the stock when they want to."
While Nykaa started out as a multi-brand beauty products e-tailer, it forayed into fashion three years ago, with plans to further expand in categories such as wellness, tech accessories, mom and baby and jewelry. It has an inventory-led model for beauty and cosmetics, and a marketplace model for fashion.
"We want to build a bunch of lifestyle categories and become a house of brands rather than just a multi-brand retailer. In terms of international markets we will look at the Middle East and UK," she added.
Nykaa's IPO also comes at a time when the beauty and lifestyle commerce space has taken off in India, with well-funded, new-age firms such as Good Glamm, Sugar, Purplle and so on. "Most of the competition has been around and has existed as long as Nykaa. We have been able to create a substantial business," Anchit Nayar said.
While 95 percent of its business currently comes from online channels, it expects this to go up to 15 percent of the total business going forward as its stores and footfalls go up post-pandemic.
It has over 20.3 million monthly average unique visitors and a GMV(gross merchandise value) of $147 million for the first quarter of FY2022.
It's been EBIDTA positive for the last three years and turned PAT (profit after tax) positive in FY2021. While it has GMV of $547 million for FY2021, it reported revenue of $330 mn for the same period. It posted an EBIDTA of $21.8 mn for FY2021, with a margin of 6.6%.
Nykaa believes there is huge scope to expand the market as online commerce is still a fraction of the total retail spend in India. Its average order value too is higher than peers, with Rs 1,886 for beauty and Rs 3,197 for fashion respectively. The management said there wasn't much of a difference in AOV between its metro and non metro markets.
FSN E–Commerce Ventures, which runs Nykaa and Nykaa Fashion, will launch its initial public offering (IPO) on October 28. The offer will close on November 1.
The company plans to raise Rs 5,351.92 crore through its public issue at the upper price band. The price band has been fixed at Rs 1,085-1,125 a share.
Read More: Nykaa IPO to open on October 28, price band at Rs 1,085-1,125 per share