Rising to the challenge of meeting the needs of the Indian consumer is cosmetics aggregator and e-commerce unicorn Nykaa. With its recent stellar IPO debut, Nykaa has made itself a home in the minds of the country’s populus.
Being one of the oldest civilisations over the world, India is home to centuries worth of beauty practices handed down, from generation to generation. Simultaneously, India is also bearing witness to an emerging upper middle class with a consistent hand on the nerve that is global beauty trends. The Indian consumer is, thus, a unique blend of modernity and tradition- kajal smeared eyes stark against glass skin.
Brand History
Nykaa was founded by banker Falguni Nayar in 2012 as an online-only cosmetics and beauty retailer. After initial success, in 2020 the Mumbai-based company expanded into an omni-channel retailer with the opening of an offline store in Delhi.
By the end of August 2021, the company’s mobile application had been downloaded 55.8 million times, Nykaa also has 80 physical stores across 40 cities. The physical stores are of three varieties-Nykaa Luxe, Nykaa On Trend and Nykaa Kiosks.
Nayar continues to head the company as its CEO and owner with a 53.4% stake in the company.
Market Standing
When talking about the space Nykaa occupies in the market, it’s imperative to understand the market itself. The global cosmetics market was valued at $380.2 billion in 2019. It is projected to reach $463.5 billion by 2027, registering a CAGR of 5.3% from 2021 to 2027. India’s cosmetics market is valued at $20 billion in 2020. The industry was led by bath and shower products in the same year. It currently shares about 6% market share in the personal care market.
Nykaa occupies a very unique space in the market. The retailer offers a range of brands much more vast than its competitors. Its product offerings range from skincare and cosmetics to personal care items.
Funding Status
Nykaa, before it debuted its IPO went through a few rounds of funding, especially during the thick of the COVID-19 pandemic. Nykaa founder Falguni Nayar stated, “Last year, when we did the fundraise it was a Covid-impacted month, and from a certain perspective we needed to bolster our resources, and that valuation was right in the context then.”
Business has continued to grow for the company since its last funding round. As stated by Nayar, Between FY19 and FY21, the company’s gross merchandise value grew at a CAGR of 66%. In the first quarter of FY22, the beauty segment grew 178% year-on-year. Nykaa’s fashion vertical, which launched last year, has also grown at a rapid pace.
Initial Public Offering
Nykaa debuted its IPO on November 11. As per its draft red herring prospectus (DRHP), the IPO details were set to be:
Face value: Re 1 per share
Price band: Rs 1,085-1,125
Fresh issue: Rs 630 crore
Offer for sale: Rs 4,721 crore
Listing: National Stock Exchange and BSE
Book running lead managers: Kotak Investment Banking, Morgan Stanley India Co., BofA Securities India, Citigroup Global Markets India, ICICI Securities, and JM Financial.
What Nykaa plans to do with the money raised
The company reportedly plans to use the capital raised investment in subsidiaries, opening physical retail stores, and capital expenditure towards new warehouses. Furthermore, the Nykaa will spend a significant chunk of the fresh injection of capital towards acquiring and retaining customers and the repayment of previous borrowings.
All in all, the company’s successful IPO has placed the retailer on the precipice of new possibilities and endless opportunities. Whether or not Nykaa is able to live up to the faith the country has put in it is yet to be determined.
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