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Nykaa’s glamorous IPO affair

Nykaa’s glamorous IPO affair

he third Indian unicorn to go public could add gloss to a record year
July 4, 2021
3 min read
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Nykaa’s glamorous IPO affair

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Nykaa’s glamorous IPO affair

how does one define good looking? It’s abstract. no one can. but irrespective of one’s idea of beauty, people spend a lot of money trying to look good. it’s that quest to look extraordinary that drives one of the world’s largest industries — cosmetics.

Nykaa is the result of that quest. cosmetics and beauty in India was valued at $13 billion in 2020, and is expected to grow to $29 billion by 2025. Nykaa, when it lists subsequent to a $715 million public offering, will be valued at $7.4 billion. its shares are already selling for over 60% higher on the grey market.

so what’s all the fuss about?

on an upswing

in FY21, Nykaa’s total gross merchandise value (GMV) was ₹4,045.98 crore, 50.7% higher than in FY20. it continued that momentum into Q1FY22, where its GMV was ₹1,469.61 crore, up 238.8% from the year-ago period.

one factor that’s fairly rare among Indian unicorns is profitability. it’s precisely this code that Nykaa has managed to crack, steadily rising from a loss of ₹25 crore in FY19 to a loss of ₹17 crore in FY20, and finally a profit of ₹62 crore in FY21. its average order values of ₹1,963 for the beauty segment and ₹3,977 for fashion are the best among e-tailers.

Nykaa is also rather capital-efficient, generating a better Return on Equity (RoE) than already-listed unicorns, Zomato and CarTrade. this means the company generates more money for shareholders thanks to less debt to be paid, lower operating costs, etc. perhaps one of the benefits of having a former-investment banker and India’s second self-made woman billionaire, Falguni Nayar, as its founder.

not a one-trick pony

Nykaa has carved out a niche for itself with a keen focus on content-led customer acquisition with nearly 1,500 influencers, 12.6 million Facebook followers, and 1.1 million YouTube subscribers. its ability to bring global brands like Estee Lauder, Huda Beauty, Charlotte Tilbury, etc. to Indian consumers also sets it apart from the competition.

at the same time, it has grown private labels such as Kay Beauty, Twenty Dresses, Nyka, and Pipa Bella under its umbrella. further, it’s not just an online player, with an offline presence of around 80 stores across 40 cities that it’s looking to expand. 

after a bumper first half of the year, newly listed companies have experienced mixed fortunes in subsequent months. can Nykaa set the ramp alight again?