Nykaa’s IPO which many investors are eagerly waiting for because it is a startup but profit-making. This is a very rare combination, so today we will know about Nykaa’s IPO, so let’s know the full story of Nykaa.
While many big unicorn startups like Phonepe, Paytm, and OYO are continuously booking huge losses, Nykaa has booked a profit of 62 crores financially in 2021.
Nykaa’s business model
The reason behind this profit of Nykaa is Nykaa’s Monopoly. Nykaa’s main business is the beauty and personal care marketplace where they have a monopoly. And they have a 30% market share in beauty products.
Nykaa has 13 private brands of its own, the inventory of this marketplace of Nykaa works very differently from the inventory of the rest of the e-commerce company.
Do you know how Amazon and Flipkart’s inventory works, let us tell you that Flipkart and Amazon do not buy goods directly from third-party brands.
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They directly display third-party products on their platform. As soon as a user places an order for that third-party product, Flipkart picks up the product from the third-party seller and dispatches it.
So here it is a normal e-commerce company that does not keep this inventory with them.
The model of the same Nykaa is very different. Nykaa buys those products directly from third-party brands then showcases them on their platform and dispatches those products directly from their inventory when an order is placed for them.
The most important advantage of which is that the company also has complete control over the product and quality control.
While this benefit is not with companies like Flipkart and Amazon. At present, they are not getting any big competition in this beauty marketplace business of Nykaa company.
Business Growth of Nykaa Company
The company has also started increasing its physical presence in the last few years. At present, the company has 73 physical stores. Nykaa sells approximately 25 products per minute.
After 2021, the company has benefited even more, where many people transacted from offline to online and this monopoly got its full benefit.
If we look at the average order value of Nykaa company’s beauty care and personal care products, then in the last two years it has gone from Rs 1433 to Rs 1963.
Whereas the average price in the entire beauty industry is ₹ 900. This simply means that Nykaa has come a long way in the competition and people still have a lot of confidence in the company’s product.
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Due to this the company’s gross merchandise value and revenue are increasing very fast. In the last two years, the revenue compound rate of the company has increased by 48% annually and the company has also become profitable.
Beauty is a very high margin business where an average margin of 60% is available and hence this business has become a very trending business at the moment. Where everyone wants to enter.
Recently Amazon has invested Rs 175 crore in MyGlamm and Grofers has invested in Orange Something which manages the entire supply chain from manufacturing beauty products to their sales.
So in the coming time, the company can get competition here.
There are many beauty products companies such as Purplle which have also grown very fast in the last few times.
Nykaa Fashion
The company’s second business is Nykaa fashion through which the company sells apparel.
Let us tell you that after 2020, when the demand for masks and other personal care things started increasing, the company immediately started launching those products and earned a lot of revenue there.
So you can say that the company is an opportunity company.
India has more number of young people in comparison to US and China and also the number of the middle class in India who have a lot of purchasing power is increasing very fast.
Which will directly benefit the beauty industry. Nykaa is today a leader in its segment due to its excellent business strategy.
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The women’s employment rate in India is decreasing very fast. It was 30% in 1990, 25% till 2010 and in 2020 it has come only at 20%.
India’s rank among 153 countries in the women workforce participation rate is 145. Bangladesh is also above India here and hence Nykaa is smartly covering the men’s grooming market as well.
But as we saw that Nykaa has a monopoly in the beauty marketplace, in the same situation men’s grooming is not in the market.
Here the market is already very much overcrowded, here companies like The Man Company have already captured the market.
Conclusion of Nykaa IPO
Nykaa is a family business where more than 50% of the company’s stack is with the Nayar family. Falguni Nayar, who was earlier the Managing Director of Kotak Mahindra Capital, started Nykaa after spending 19 years there.
Initially, she invested 14 crores herself, later she raised about 2500 crores from venture capital.
Because of the strong financial position of the company, there is a lot of interest of investors here in Nykaa.
There is a price band of Rs 1025 to 1125 and the market capitalization of the company is approaching around 52000 crores and at this price point, many investors are investing in the company to gain listing.
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Looking at the current market buzz and other things, the chances of listing gain are very high here, and let us tell you that listing gain does not have much to do with the fundamentals of the company.
The listing end depends on what is the buzz going on in the market, how the IPO is getting subscribed in the first two days and how the company’s grey market premium is going on these things.
At present, monopoly is going on in the company’s beauty market place and the company has come a long way in the entire industry.
But it is a bit difficult to show similar growth even further because the competition is increasing very fast here and many big companies are entering the market, so it will not be so easy to show similar growth even further.
For some time we have seen that on the day of listing gain, the share price of some companies increases very fast like Zomato, after which long-term investors do not have much margin-left.
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Nykaa’s IPO Coming on October 28, 2021.
There is a price band of Rs 1025 to 1125 and the market capitalization of the company is approaching around 52000 crores and at this price point, many investors are investing in the company to gain listing.
Nykaa has 13 private brands of its own, the inventory of this marketplace of Nykaa works very differently from the inventory of the rest of the e-commerce company.
The company’s second business is Nykaa fashion through which the company sells apparel.
The company has also started increasing its physical presence in the last few years. At present, the company has 73 physical stores. Nykaa sells approximately 25 products per minute. If we look at the average order value of Nykaa company’s beauty care and personal care products, then in the last two years it has gone from Rs 1433 to Rs 1963.