Market-bound Nykaa looks to expand into Middle East, Europe

By Tarush Bhalla

  • 25 Oct 2021
Credit: 123RF.com

FSN E-Commerce Ventures Ltd, which owns online beauty and cosmetics retailer Nykaa, is now looking to expand its services to the Middle East and Europe as it gears up for its public share sale later this month, the company said on Monday.  

The company has priced its initial public offering (IPO) at ₹1,085 to ₹1,125 per share, and could raise as much as Rs 5350 crore on the upper end of the price band, giving it a valuation of as much as $7.11 billion. The three-day initial share sale will be open for subscription on Thursday, October 28 and conclude on November 1. 

The offer comprises a fresh issue of equity shares aggregating up to Rs 630 crore and an offer for sale of up to 41.9 million equity shares being offered by the selling shareholders. It includes a reservation of up to 250,000 equity shares for purchase by eligible employees.

Speaking on the company’s growth plans, co-founder and chief executive officer of Nykaa, Falguni Nayar said that the company is actively looking at international expansion and plans to take Indian brands along with its private labels to international customers. 

“At the moment we are very keen to go into the Middle East, where we think there is a lot of affinity to Indian consumption, and want to export many of our Indian brands as well as our own brands [...] The UK is another market where we're starting out. Europe is another area of opportunity,” said Nayar during the press briefing. 

Nayar also added that Nykaa will look to launch its own ‘house of brands’ to cover for certain market gaps in the beauty and fashion industry.  

This ‘house of brands’ strategy was popularised by US-based startup Thrasio Holdings, in which a company acquires fast-growing online brands to build an assortment of products, while helping brands scale and significantly grow their business through investment in technology, working capital and marketing efforts.

“We've always said that we will be a multi-brand retailer first with an extremely vibrant platform available to all our brand partners. So we will always be a retailer first,  but within that there are always market gaps and ideas of brands that we can offer to the customers to make the experience better. So we will be a house of brands, also with a range of brands across beauty and fashion, that will contribute to a fair percentage of our net revenue,” added Nayar. 

Apart from beauty and fashion, Nykaa is also exploring adjacencies and offering products across home and lifestyle segments on its platform. 

Currently, Nykaa owns inhouse private brands including Nykaa Naturals, Kay Beauty in association with actress Katrina Kaif, and also recently acquired direct-to-consumer skincare brand Dot & Key.  

The company claims to clock gross margins as high as 40% in sales and has a fulfilment cost of 10%.  It also has a transacting customer base of roughly 13 million users. 

The company reported a net profit of ₹61.9 crore for financial year 2020-21 as compared to a loss of  ₹16 crore in the previous fiscal, making it one of the only profitable Indian unicorns going for a public listing this year.  

Its revenue from operations jumped to ₹2,441 crore from ₹1,768 crore. For the 3 months ended June 30, 2021, Nykaa’s total GMV stood at ₹1,469.6 crore.

“We have a large shareholding besides the promoters. We believe that taking a path to listing considering – the long term, sustainable, presence and life of the capital markets — was the best way to allow investors to enter and exit the stock when they need to. So I thought that this gives independence (to Nykaa) and removes dependence on the company to provide those exits,” said Nayar on the decision behind the IPO. 

Currently, Nykaa’s promoters including Nayar and family members hold around 45.99% of the issued, subscribed and paid-up equity share capital of the company.

Nykaa plans to use the IPO proceeds to set up new retail stores, fund capital spending and repay debts. Kotak Mahindra Capital Company, Morgan Stanley India Company, BofA Securities India, Citigroup Global Markets India, JM Financial and ICICI Securities are merchant bankers to the issue.