India’s first women-led profitable unicorn Nykaa (FSN E-commerce) is all set to launch its IPO on 28 October 2021. The upcoming IPO is priced at INR1,085 – 1,125 per share and is aimed at raising INR5,351.9 crore at the upper end of the price band. Nykaa IPO will be a mix of fresh issue worth INR630 crore and around 42 million shares for sale by existing shareholders. Here is a brief synopsis of the company, its operations, and future plans.
#1 Nykaa IPO – Issue Details
Nykaa IPO offer details
| Subscription Dates | 28 October – 1 November 2021 |
| Price Band | INR1,085 – 1,125 per share |
| Fresh issue | INR630 crore |
| Offer For Sale | 41,972,660 shares (INR4,554.03 – 4,721.92 crore) |
| Total IPO size | INR5,184.03 – 5,351.92 crore |
| Minimum bid (lot size) | 12 shares (INR13,020 – 13,500) |
| Face Value | INR1 per share |
| Retail Allocation | 10% |
| Listing On | NSE, BSE |
#2 Nykaa IPO – Issue objectives
Nykaa plans to use the proceeds from the IPO for
- Investment in FSN Brands and Nykaa Fashion for funding the set-up of new retail stores – INR42 crore
- Capital expenditure to be incurred by the company and investment in Nykaa E-Retail, Nykaa Fashion and FSN Brands for funding the set-up of new warehouses – INR42 crore
- Repayment or prepayment, in full or in part, of certain borrowings availed by the company and Nykaa E-Retail – INR156 crore
- Expenditure to enhance the visibility and awareness of its brands – INR234 crore
- General corporate purposes
#3 Nykaa IPO – Business background
Incorporated in 2012, Nykaa is a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. It has a diverse portfolio of beauty, personal care and fashion products, including self-manufactured products. It offers consumers an omnichannel experience with an endeavor to cater to the consumers’ preferences and convenience:
Online: Its online channels include mobile applications, websites and mobile sites. As of March 31, 2021, it had cumulative downloads of 43.7 million across all its mobile applications and during the Financial Year 2021, 86.7% of its online GMV came through its mobile applications. It has one of the highest shares of mobile application-led transactions, among the leading online retail platforms in India during Financial Year 2021.
Offline: The company’s offline channel comprises of 73 physical stores across 38 cities in India over three different store formats as of March 31, 2021. Physical stores offer a select offering of products as well as a seamless experience across the physical and digital worlds.
- Nykaa: Beauty and personal care
- Nykaa Fashion: 1,350 brands and over 1.8 million SKUs with fashion products including apparels and accessories across four consumer divisions: women, men, kids and home.
The company also focuses on inspiring and educating consumers via digital content, digital communities and tech-product innovations, which is an integral component of its business model.
#4 Industry outlook – Huge opportunity size
India’s retail market is expected to grow from INR54.8 trillion in the calendar year 2020 to reach approximately INR91.2 trillion by the calendar year 2025. Also, there is a large market opportunity aggregating INR10.6 trillion (USD152 billion) in the growing beauty, personal care and fashion industry by the calendar year 2025 in India. Out of this, the beauty and personal care market is estimated to grow to approximately INR2 trillion (USD28 billion) while the fashion market is likely to grow to approximately INR8.7 trillion (USD124 billion) by the calendar year 2025.
This growth is projected to be primarily driven by market shift towards the organized sector, high growth of e-commerce due to increased internet penetration, growing wallet share for beauty, personal care and fashion products and increased spending leading to subsequent premiumization across categories.
#5 Nykaa IPO – Private equity on board
While FSN E-commerce is largely a family-controlled entity, there are several prominent investors on board. Some of these include Harindarpal Singh Banga of The Caravel Group, Sunil Kant Munjal of Hero Group, and Narotam Sekhsaria of Ambuja Cements. Nykaa also benefits immensely from the presence of private equity investors Steadview Capital and TPG Capital.
| Name of the Shareholder | No. of Equity shares | Percentage(%) |
| Sanjay Nayar Family Trust | 120,118,920 | 25.38% |
| Falguni Nayar Family Trust | 104,305,770 | 22.04% |
| Harindarpal Singh Banga and Indra Banga | 40,679,790 | 8.60% |
| Sunil Kant Munjal | 21,189,300 | 4.48% |
| Narotam Sekhsaria | 17,085,150 | 3.61% |
| Steadview Capital Mauritius Ltd | 16,384,440 | 3.46% |
| TPG Growth IV SF Pte. Ltd | 16,264,560 | 3.44% |
| Lighthouse India Fund III, Limited | 14,533,860 | 3.07% |
| Anchit Nayar Family Trust | 14,370,000 | 3.04% |
| Adwaita Nayar Family Trust | 14,370,000 | 3.04% |
| Mala Gaonkar | 11,390,190 | 2.41% |
| Fidelity Blue Chip Growth fund | 6,140,430 | 1.30% |
#6 Management: Old Guard + Fresh Talent
Nykaa is the brainchild of Falguni Nayar who spent most of her career in investment banking and broking industries before founding the beauty e-tailer. She was associated with Kotak Mahindra Capital Company for 18 years where she also served as a managing director. She has also served on the boards of various companies, including Tata Motors and Aviva Life Insurance Company India. Falguni Nayar is a pass out of Indian Institute of Management, Ahmedabad.
Falguni Nayar is supported by co-founder and Executive Director Adwaita Nayar. Adwaita serves as the chairperson and CEO of Nykaa Fashion. She has a master’s degree in business administration from the Harvard Business School and has been involved in the areas of marketing, operations and product development.
Another key management personnel is Anchit Nayar who served as the vice president of the Investment Banking Division at Morgan Stanley, New York before joining Nykaa. An alumnus of Columbia University, Anchit is responsible for the beauty business and is also a member of the investor relations team.
In addition, there are several experienced people serving as independent directors.
| Name | Age | Designation | Joined on |
| Falguni Nayar | 58 | Executive Chairperson, MD and CEO | Founder |
| Sanjay Nayar | 60 | Additional Non-Executive Director | 09 Apr 2021 |
| Adwaita Nayar | 30 | Executive Director | 22 Jan 2018 |
| Anchit Nayar | 30 | Executive Director | 13 Aug 2019 |
| Anita Ramachandran | 66 | Independent Director | 12 Oct 2015 |
| Milan Khakhar | 60 | Non-Executive Director | 28 Sep 2015 |
| Alpana Parida | 58 | Independent Director | 28 Sep 2015 |
| Pradeep Parameswaran | 47 | Independent Director | 15 July 2021 |
| Seshashayee Sridhara | 55 | Independent Director | 26 July 2021 |
| Milind Sarwate | 61 | Independent Director | 15 July 2021 |
#7 Financial performance and Valuation
Nykaas’ financial performance in the recent years has been marked with better cost control, although it posted losses in two of the last three years. Nevertheless, its margins have improved substantially in these years.
Nykaas’ Financial Performance (in INR crore)
| FY2019 | FY2020 | FY2021 | |
| Revenue | 1,116.4 | 1,777.8 | 2,452.6 |
| Expenses | 1,148.1 | 1,790.3 | 2,377.3 |
| EBITDA | 20.5 | 81.1 | 161.4 |
| EBITDA Margin (%) | 1.8 | 4.6 | 6.6 |
| Net income | (24.3) | (16.2) | 59.8 |
| Margin (%) | (2.2) | (0.9) | 2.4 |
The company has priced the offer in the range of INR1,085 – 1,125 per share. This values the business at P/E ratio range of 809.7 – 839.6 which is quite high. A better valuation metric would be EV/S (Enterprise Value to Sales) ratio which stood at 21.8 for FY2021.
For the year ended 31 March 2021, the company’s RONW stood at 12.6%. This is higher than the comparative figure of -5.2% in FY2020. As of 30 June 2021, the company’s debt equity ratio stood at 0.38 which is quite less. With quite a big addressable market and reinvestment opportunity, this combination of high RONW, low debt and strong revenue growth is likely to do well for the company.
