IPO-bound Nykaa plans to open more stores in Tier II and III towns

FSN E-Commerce Ventures — the parent company of beauty care unicorn Nykaa — on Monday said it will open its initial public offering (IPO) on October 28, Thursday.

The IPO of Mumbai-based omnichannel personal care, beauty, and fashion brand is priced in the range of Rs 1,085-1,125 per equity share.

The offer comprises a fresh issue of equity shares, aggregating up to Rs 630 crore, and an offer for sale (OFS) of up to 41,972,660 (41.97 million) equity shares offered by the selling shareholders. It is expected to raise between Rs 5,184 - 5,352 crore.

Moreover, the IPO will see promoter Sanjay Nayar Family Trust sell up to 48 lakh equity shares, investors TPG Growth IV SF Pte Ltd offload over 54.21 lakh shares, and Lighthouse India Fund III sell 48.44 lakh shares through the OFS.

The IPO will close on November 1, while the trading on the stock exchanges will commence from November 11.

Nykaa’s IPO comes a little less than three months after food delivery giant Zomato got listed on the Indian bourses and close to a month after Indian SaaS unicorn Freshworks got listed on NASDAQ.

ALSO READ

Nykaa IPO: How the online marketplace changed the beauty landscape and diversified into new categories

During a virtual press meet, Anchit Nayar, CEO - Beauty Ecommerce, Nykaa, said the brand is planning to grow its store count to triple digits in Tier II and III towns as it receives over half of its demand from these markets.

With 80 stores across 40 cities, Nykaa is looking to add more stores in Tier-II cities and beyond to bring their store count to triple digits. Nykaa opened its first physical outlet in 2014, two years after investment banker-turned-entrepreneur Falguni Nayar launched it in 2012.

According to its Draft Red Herring Prospectus (DHRP), filed with the Securities and Exchange Board of India (SEBI), the beauty care unicorn proposed to utilise Rs 2,340 million of the net proceeds for branding activities and to create deeper penetration in Tier II and III geographies.

The unicorn claims to receive 5 percent of its orders from physical stores, while its app and website contribute the remaining 95 percent of the gross merchandise value (GMV). 

In fact, Nykaa’s app contributes about 90 percent of its GMV. During FY21, the startup’s fashion business contributed 25 percent of its GMV.

While Nykaa’s average order value for its beauty business stands at Rs 1,800 per order, its fashion business reports an average order value of Rs 3,190 per order.

“We have a very large assortment of products, and while we can put everything on our website, having it in a retail store is a challenge. But in the longer-term, physical retail will be a double-digit contribution to Nykaa’s growth,” Anchit said.

The startup unicorn expects its physical retail to contribute 12-15 percent of the total business. At present, it stands at 5 percent as compared to 8-10 percent in pre-pandemic days.

The Columbia University graduate — who joined Nykaa in 2018 — claims the physical retail slowdown amidst the COVID-19 pandemic boosted online orders for Nykaa.

With a strong online presence, consumers spend over 95 million hours annually on Nykaa’s app or website, it said.

According to the DHRP, there is a large market opportunity, aggregating around $152 billion in the beauty, personal care, and fashion industry by 2025. Nykaa is among the few profitable startups in the Indian startup ecosystem, which reported a net profit of Rs 61.96 crore in FY21 compared to a loss of Rs 16.34 crore in the previous fiscal.

The startup’s revenue touched Rs 2,453 crore in FY21, recording a 38 percent annual growth compared to the previous fiscal.

Falguni Nayar, Founder and CEO, Nykaa, stated the brand would also be looking to expand on the international turf, starting with the UK in Europe and a few West Asian countries.