Nykaa has a significant market opportunity aggregating Rs 10.6 trillion in the fast-growing beauty, personal care, and fashion industry by 2025 in India.The initial share sale of FSN E-Commerce Ventures, which runs an online marketplace for beauty and wellness products Nykaa, is set to open for public subscription on October 28.
E-commerce beauty giant Nykaa will open its initial public offering (IPO) to subscribers on Thursday, aiming for a total valuation of over $7 billion.
Founded by former investment banker Falguni Nayar, the woman-led unicorn offers 4,000 beauty, personal care and fashion brands through its website, app, and 80-odd brick-and-mortar stores.
FSN E-Commerce Ventures (Nykaa) is a digitally native consumer technology platform, delivering a content-led and lifestyle retail experience to consumers.
It has a diverse portfolio of beauty, personal care and fashion products, including its owned brand products manufactured by the company.
Nykaa operates under two verticals – Nykaa: Beauty and Personal Care; and Nykaa Fashion: Apparel and Accessories. Its beauty and personal care offerings are extensive, with 256,149 SKUs from 2,644 brands primarily across makeup, skincare, haircare, bath and body, fragrance, grooming appliances, personal care, and health and wellness categories.
Nykaa Fashion housed 1,434 brands and 2.8 million SKUs with fashion products across four consumer divisions: women, men, kids, and home. It offers consumers an omnichannel experience by providing both online and offline channels.
It also focuses on educating consumers via digital content, digital communities, and tech product innovations, an integral component of its business model.
About the Company
Nykaa is an Indian e-commerce company founded by Falguni Nayar in 2012 and headquartered in Mumbai.
It sells beauty, wellness and fashion products across websites, mobile apps and 76 offline stores. It is a unicorn startup, and as of 2020, was valued at ₹85 billion (US$1.1 billion).
It sells products that are manufactured in India as well as internationally. In 2015, the company expanded from online-only to an Omni channel model and began selling products apart from beauty. In 2020, it retailed over 2,000 brands and 200,000 products across its platforms.
Falguni Nayar, a former managing director at Kotak Mahindra Capital Company, founded Nykaa in 2012. It started as an e-commerce portal curating a range of beauty and wellness products. The brand name Nykaa originated from the Sanskrit word ‘nayaka’, meaning ‘one in the spotlight’.
In 2015, the company expanded from online-only to an omnichannel model and began selling fashion products. In 2018, the company launched Nykaa man, India’s first multi-brand e-commerce store for men’s grooming.
The company expanded into fashion by launching Nykaa Design Studio, rebranding it to Nykaa Fashion.
In 2020, Nykaa launched Nykaa PRO. It is a premium membership program that provides users unique access to professional beauty products and offers via the Nykaa App.
In December 2020, Nykaa Fashion launched its first store in Delhi, making the fashion business omnichannel.
Valuation
Nykaa has a significant market opportunity aggregating Rs 10.6 trillion in the fast-growing beauty, personal care, and fashion industry by 2025 in India.
The Indian beauty and personal care market are estimated to grow to Rs 2 trillion by 2025 from Rs 1.1 trillion in 2020. The Indian fashion market is estimated to grow to Rs 8.7 trillion by 2025 from Rs 3.8 trillion in 2020.
The growth projected to be primarily driven by the 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 leads to subsequent premiumization across categories.
Further, compared to other mature e-commerce categories, beauty and personal care and style have lower online penetration.
Results
Nykaa will benefit from growing industry trends given its resilient, capital-efficient business with a combination of solid growth and profitability. Its financial performance has been strong, with a revenue CAGR of 48.2% over FY19-21.
The operating margins have also seen a marked improvement from 1.85% in FY19 to 6.61% in FY21. In the future, Nykaa intends to acquire new customers and increase its customer loyalty continuously.
It also plans to expand into lifestyle adjacencies and launch new channels, and it also aims to explore expansion selectively and prudently into international markets.
Given the positive industry prospects and Nykaa’s strong foothold, we positively affect the company for the long term.
