Beauty and fashion retailer Nykaa is all set to tap into public markets, having filed for a ₹4000 crore IPO. As per the draft red herring prospectus that was filed with the stock market regulator Securities and Exchange Board of India (SEBI) this week, the company is seeking to raise $71 million through a fresh issue of shares and is also proposing to sell the 43.11 million shares held by existing shareholders.
Veteran investment banker-turned-entrepreneur, Falguni Nayar founded Nykaa in 2012. The Mumbai-headquartered startup now offers more than 2,500 cosmetic brands. While most businesses were facing closure due to the pandemic, Nykaa, through its websites, apps and 70-plus shops, experienced a shopping surge that boosted its annual revenue. It earned close to $334 million in March 2021, significantly up from $236 million in the previous fiscal year. The company reported a net profit of $8 million during the same period, versus a net loss of $2 million in the fiscal year 2020.
“I was inspired by those die-hard founders,” Nayar said in a recent interview with Bloomberg. “Our message to women has been that the spotlight of her life should be on herself.” She continued, “You are important in your story and should feel no guilt at being centre stage.”
The IPO is well-timed as Nykaa has managed to turn profitable amid global crises, making it an attractive proposition for investors. The listing, which could value the nine-year-old company at an estimated $4.5 billion or more, has propelled the worth of Nayar’s initial $2 million investment even further. If the IPO goes as planned, Nykaa will be India’s first woman-led unicorn to go public.
Nayar owns 54 percent of the company along with her husband Sanjay Nayar, India CEO of the US private equity giant Kohlberg Kravis Roberts & Co. Inc., and their two children. The list of shareholders who are selling a part of their stake in the offering includes promoter Sanjay Nayar Family Trust (4.8 million shares), and investors such as TPG Growth IV, Lighthouse India Fund III, Lighthouse India III Employee Trust, JM Financial and Investment Consultancy, and Sunil Kant Munjal, among others.
The IPO will result in a massive payoff for Nykaa’s early investors such as consumer goods billionaire Harsh Mariwala and Hong Kong-based commodities billionaire Harindarpal Singh Banga.
There is a steady rise in competition in the beauty industry with Amazon.com Inc. and Walmart Inc. (which controls Flipkart) expanding in the $15 billion beauty market, not to mention speciality retailers such as LVMH’s Sephora. Local rival Purplle has landed backing from Goldman Sachs Group Inc. According to estimates by Bangalore-based RedSeer Management Consulting, the Indian beauty and personal care market is expected to hit $28 billion in 2025, up from $16 billion in 2020. The fashion market is expected to touch $124 billion, up from $54 billion in 2020.
Nykaa is planning to deploy the IPO proceeds into new warehouses and stores and to enhance its brand visibility through marketing and promotional activities. As more competitors move into the beauty market, Nykaa aims to spend its funds on deepening its presence by strengthening its 13 brands, including Nykaa Cosmetics, Nykaa Naturals, Kay Beauty and so on.