Nykaa’s IPO opened on 28 October. In this article, you will know about GMP, Issue Date, Financials, Price, Lot Size & Details of Nykaa IPO.
Nykaa’s IPO Details
| Nykaa IPO Opening Date | 28 October 2021 |
| Nykaa IPO Closing Date | 01 November 2021 |
| Nykaa IPO Price | ₹1085 to ₹1125 per equity share |
| Nykaa Issue Type | Book Built Issue IPO |
| Nykaa Face Value | ₹1 per equity share |
| Market Lot | 12 |
| Minimum Order Quantity | 1 Lot |
| Listing Exchanger | NSE, BSE |
| Nykaa Listing Date | 11 November 2021 |
| Basis of allotment date | 08 November 2021 |
| Nykaa Issue Size | ₹5351.92 crores |
| Nykaa Fresh Issue | ₹630 crores |
| Nykaa offer for sale | ₹4721.92 crores |
About Nykaa Company
FSN E-Commerce Ventures was incorporated in the year 2012 by Falguni Nayar. Falguni Nayar has also been the Managing Director of Kotak Mahindra Bank.
Apart from this, she has also given her service as a board member in many companies such as Aviva Insurance, Dabur India, etc. She has also served as an independent board member of Tata Motors in the past.
Promoters hold a 54% stake in the company. Many market funds have invested in Nykaa such as Steadview capital, TPG growth fund, Lighthouse India fund, etc.
Apart from this some famous industrialists such as Sunil Kant Munjal and Narotam Sekhsaria have also invested in Nykaa.
The company mainly has two business verticals:
Nykaa: Online and offline marketplace for beauty and personal care products
Nykaa fashion: Fashion apparel and accessories
This company operates in both offline and online modes.
Objectives of Nykaa’s IPO
The objectives of the company behind this IPO of Nykaa are:
- The company will invest 234 crores to further increase its brand awareness and visibility.
- Setting up new warehouses for its subsidiaries such as Nykaa e-retail, Nykaa fashion, and FSN brands. And for some other activities, Nykaa will invest 42 crores in these.
- Both Nykaa Company and its subsidiary Nykaa e-retail have borrowings of 156 crores, so the company will repayment of this borrowing after this issue.
- And will use these rupees for some general corporate purposes.
So it was some objective due to which the company is bringing its IPO.
Nykaa Company Valuation
Offline Valuation: According to the data as of August 2021, the company has 80 physical stores in 40 cities in India.
The company has a total of 2,644 brands and 2,56,149 SKUs in the beauty and personal care vertical.
Online Valuation: Nykaa cumulatively has 55.8 million downloads as of August 2021. The download of apps is important because 88.2% of the company’s online GMV (Gross merchandise value) comes through the mobile app.
The company has a total of 3.1 million SKUs (Stock Keeping Units) of 4078 national and international brands across both its verticals.
This includes make-up, personal care, hair care, grooming appliances, bath and body, fragrance, skincare, and health & wellness categories.
Nykaa Fashion Division
Nykaa fashion has four major divisions:
- Men
- Women
- Kids
- Home
The company has a total of 2.8 million of 1434 brands in these four divisions.
Nykaa outsources the production of its own beauty and personal care products.
These products are sold under the brands Nykaa Cosmetics Nykaa Natural and Kay Beauty.
Nykaa’s Physical stores
Nykaa’s physical stores have 3 formats:
- Nykaa Luxe
- Nykaa Kiosks
- Nykaa On Trend
The beauty and personal care business is mainly run through an inventory model, where the company buys products directly from brands or authorized distributors.
So that the authenticity of the products is maintained.
Nykaa has also launched the Nykaa mobile app and website for men’s personal care products and grooming.
Nykaa Fashion focuses heavily on things like selling full-price products, relying less on discounting and selling the latest season designs.
So far in FY22, around 16.1% of Nykaa fashion came from GMV full price collection with discounts ranging from zero to 10%.
If we talk about the average value of models, then Nykaa fashion is at the top of the entire online fashion industry.
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Nykaa also leverages the crosses of social media influencers through its Nykaa affiliate program. As of August 2021, the program has a total of 3055 influencers.
Nykaa has 1.2 million subscribers on the YouTube channel Nykaa TV, through which the company posts fashion and beauty content.
On his channel, he provides content related to beauty cosmetics and styling for custom education and awareness.
The Nykaa Network is an online community of beauty and fashion enthusiasts with over 3.6 million members as of August 2021.
Apart from this, the company has also launched a content aggregation hub named Explorer, in which customers can view the content and can also buy the products which are featured in the content at the same time.
This content is mainly produced by influencers. It not only includes product reviews and trials but also contains how-to tutorials.
In just 5 months of financial year 22, there have been 4.4 million visits and 9.7 million post views on explore.
Other Brands of Nykaa
Nykaa has 15 brands of its own some of which are famous:
- Twenty Dresses
- Nykd by Nykaa
- Nykaa Cosmetics
- Dot & Key
- Nykaa Naturals
- Pipa Bella
- Gajra Gang
- RSVP
- Kay Beauty
Almost 70% of this GMV comes from existing users. From which we know that the customer retention of the company is very good.
Nykaa also has a loyalty program called Nykaa Prive. It has a total of 2.1 million members as of March 2021.
Not only does this program help with repeated sales, but the program is also a great source of customer engagement and user-generated content.
Nykaa’s Financials
From financial year 19 to financial year 21, whether it should be total assets, total revenue, or profit after tax, there is a consistent improvement in all three years.
| Operating Profit Margin | 4.32% |
| Net Profit Margin | 2.53% |
| Earning Per Share | 1.34 |
| ROE | 12.62% |
| Debt to Equity | 1.33 |
| 2-years sales CAGR | 48.22% |
| Current Ratio | 1.55 |
| P/E | 839.55 |
In financial year 19, the figure of total assets increased from 775.66 to 1124.48. And then finally reached 1301.99 in the financial year 21. Then this same trend can also be seen in the total revenue, the revenue has also increased.
It reached around 1116.38 to 1777.85 till FY 20. And then in the financial year 21, it reached the figure of 2452.64.
Similarly, it can be seen that there has been an improvement in profit as well.
In the financial year 20, the company was in loss of 16.34 crores, and it registered a profit figure of 61.95 in the financial year 21.
Pros of Investing in Nykaa
Nykaa’s strong brand image and its consistent performance in the Indian BPC market is its biggest strong point.
Trust and authenticity are two big issues in the online shopping of BPC products which Nykaa has solved. And perhaps this is the reason why Nykaa is a clear winner in the online BPC market despite the presence of big competitors such as Amazon, Flipkart.
Nykaa’s strong brand image also provides it with a strong network which will help in its growth.
Nykaa is leveraging the power of social media influencers and also investing in its content platforms such as Nykaa TV, Nykaa Network and Explore, etc.
Due to this, the network of Nykaa is getting stronger.
The company is enhancing its content with the help of its existing user base and is also focusing on referrals for further business.
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The customer retention rate of the company is more than 70% which is a great strength. Nykaa is at the top of the industry in terms of content delivery and influencer base.
Because of this, the company can get a lot of help in market capture and brand development, and perhaps because of this, the company has a good presence in smaller cities.
Because tier-2 and tier-3 cities contributed 64% of the total GMV in the financial year 21.
The company’s strong focus on content, in both its BPC and fashion segments, makes it different from its competitors.
Due to this, the company’s dependence on discounts and price competition has reduced, which is a good sign for consistent profit generation.
Nykaa Company has a strong management team headed by Falguni Nayar herself who is a seasoned businesswoman. The strong vision and capabilities of the founder and management team are going to benefit the company a lot.
Cons of Investing in Nykaa
The biggest weakness of the company is its dependence on external brands. The top three external vendors account for 27.9% of the total GMV in the financial year 21.
Therefore, even if the loss of any one of the big brand vendors can be very negative for the company.
The company has no contractual commitments to its partner brands to sell products on its platform, so there is a risk that any of these partners may create their own platform and sell their products directly to end customers.
Which is also a direct competitor of Nykaa.
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The company outsources the products of its own brands, so the company does not have direct control over the quality and consistency of the product. Therefore, they have a supply chain risk associate.
Big companies like Myntra, Amazon, etc in the fashion segment and Amazon, Flipkart, etc in the beauty and personal care segment are giving competition to Nykaa.
The company’s in-house brands are facing strong competition from domestic and international brands in both the fashion and BPC segments.
Also, the company is still not a consistent profit generator and has become profitable only in the last year, the major weakness is whether the business will be able to generate profit consistently or not.
Scope of Beauty Industry
The per capita income of people is increasing rapidly in India, as well as a very large part of the population is young. Along with this, urbanization is also increasing.
Due to all these reasons, good growth is expected in the entire Internet service sector in India.
Due to the increasing use of the internet and smartphones, good growth can also be expected in the online shopping sector. It is expected that the Indian beauty and personal care industry will grow to Rs 1981 billion by the year 2025 at a growth rate of 12% CAGR.
Some of the major drivers of Beauty industry are as follows:
Growth in BPC (Beauty & Personal care) of young population BPC spending increase in non-metro cities, rise in specialized BPC categories.
The Emergence of Prestige BPC sub-segment, content leads to online product discovery becoming more popular, upcoming growth in the men grooming sector.
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The Indian online beauty and personal care market has witnessed a 71% CAGR growth rate in the last 4 years. And this market has reached 70 billion rupees.
Yet this segment contributed only 8% of the total Indian PPC market in India in the financial year 20, so there is a lot of opportunity for market capture and expansion in the online BPC sector in India as compared to other major economies.
Because 20 to 25% of the total BPC market in the USA and 35 to 40% in China are contributed by online BPC.
And it is expected that by the year 2025, the market size of the Indian fashion industry will also grow to Rs.8702 billion at a CAGR of 18%.
Some of the major growth drivers of the fashion industry are as follows:
Growth in fashion spending of young population, growth in fashion spending in tier two cities, rise in social media influence, growth in men and kids segment, the emergence of Occasion centric demand.
In the last 4 years, the Indian online fashion market has grown by 25% at a CAGR to Rs 450 billion in the financial year 20. But this is only 12% of the total fashion industry sales in FY20.
Therefore, there is a huge opportunity for market capture and expansion in the online fashion sector in India as compared to other economics.
Therefore, by the year 2025, Nykaa’s total market opportunity is being estimated at Rs 10683 billion ($152 billion). In this, Rs 1981 billion will contribute to the BPC market and Rs 8702 billion to the fashion industry.
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Offline Valuation: According to the data as of August 2021, the company has 80 physical stores in 40 cities in India.
Online Valuation: Nykaa cumulatively has 55.8 million downloads as of August 2021.
The objectives of the company behind this IPO of Nykaa are:
The company will invest 234 crores to further increase its brand awareness and visibility.
Setting up new warehouses for its subsidiaries such as Nykaa e-retail, Nykaa fashion, and FSN brands. And for some other activities, Nykaa will invest 42 crores in these.
Both Nykaa Company and its subsidiary Nykaa e-retail have borrowings of 156 crores, so the company will repayment of this borrowing after this issue.
And will use these rupees for some general corporate purposes.
Trust and authenticity are two big issues in the online shopping of BPC products which Nykaa has solved. And perhaps this is the reason why Nykaa is a clear winner in the online BPC market despite the presence of big competitors such as Amazon, Flipkart.
The company has no contractual commitments to its partner brands to sell products on its platform, so there is a risk that any of these partners may create their own platform and sell their products directly to end customers. Which is also a direct competitor of Nykaa.