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Nykaa targets $1.2 billion valuation in funding round planned this year

The purpose of this round is to set a price before coming up with an initial public offering over the next few years, sources have said.

March 09, 2020 / 02:03 PM IST

Beauty and fashion retailer Nykaa is eyeing a valuation of around Rs 9,000 crore ($1.2 billion) in a fundraise planned later this year, three sources have said.

The plan comes on the back of two successful rounds in the previous year, with the second round giving the Mumbai-headquartered company the coveted billion-dollar valuation (about Rs 7,000 crore), making it the newest unicorn in the country.

“Nykaa will raise a round valuing it at Rs 9,000 crore this year, although they are still finalising how much they will raise. The purpose of this round is to set a price (valuation) before an initial public offering (IPO) in the next few years,” said one of the persons cited above.

The company said in April 2019 it raised $14 million led by private equity firm TPG Growth. Later in the year, led by hedge fund Steadview Capital, it raised another $30 million via a secondary share sale by acquiring stakes of existing investors, the sources who wanted to remain anonymous said.

The TPG round valued Nykaa at Rs 5,000 crore. While Steadview acquired most shares at the older valuation of Rs 5000 crore, a small part of the investment valued Nykaa at about Rs 7,000 crore.

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Steadview is also an investor in companies such as Flipkart, Ola and Dream11.

“They don't necessarily need the capital for growth, since they have solid revenue growth and are profitable. It is more of a price-setting exercise, though the money may help grow specific segments,” the person added.

While Nykaa declined to comment, Steadview did not respond to an email sent to it.

Founded in 2012 by former investment banker Falguni Nayar, Nykaa started as a multi-brand online beauty retailer but has since branched into brick-and-mortar stores as well.

It has also launched in-house lipsticks, eyeshadow, oils and facemasks brands among others. The company sells more than 300,000 products across 1,500 brands, The Ken reported on January 24.

Nykaa is also one of the few venture-backed online businesses and brands that has straddled scale along with profitability.

It recorded a profit after tax of Rs 2.30 crore on a revenue of Rs 1,159 crore in the financial year 2018-19, the latest numbers that are available, against a loss of Rs 17 crore on a revenue of Rs 555 crore the previous year, according to regulatory filings accessed via Tofler.

Barring the Steadview round, which wasn’t made public, Nykaa has raised about $100 million since its inception. The investors include TVS Capital, Hero Enterprise chairman Sunil Kant Munjal and Sharrp Ventures, the family office of Marico founder Harsh Mariwala.

In recent years, India has seen a steady growth of beauty, cosmetics and wellness startups, both among brands and retailers.

With domestic brands, exclusive foreign tie-ups, discounts and promotions involving makeup tutorials, Nykaa and its competitors such as Purplle have built a significant online and offline presence.

Purplle recently raised about $40 million from American investment bank Goldman Sachs and Belgian consumer-focused investor Verlinvest.

Purplle is largely seen as the Nykaa for consumers in Tier 2 and 3 cities and beyond, said an investor in the space, requesting anonymity.

Other players includes makeup brand Sugar Cosmetics, which sells on Nykaa and Purplle’s platforms, Plum Skincare and Mamaearth that claims to provides natural, toxin-free products, including bamboo-based baby wipes, lotions and face masks.
M. Sriram
first published: Mar 9, 2020 02:00 pm

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