Online beauty products platform Nykaa plans to raise up to `525 crore through fresh issue of shares in its upcoming initial public offering (IPO), according to the preliminary documents filed with capital markets regulator Sebi. The offer also comprises an offer for sale (OFS) of up to 43.11 million shares by a clutch of existing shareholders and promoters.
Though the company’s draft red herring prospectus (DRHP) did not mention the total size of the IPO, sources aware of the discussions said it is estimated to be around `3,500-4,000 crore. Majority of the funds raised will be driven by the OFS component. The IPO is likely to value Nykaa at an estimated $5-5.5 billion, sources said.
The Sanjay Nayar Family Trust, TPG Growth, Lighthouse India Fund III, Lighthouse India III Employee Trust and Sunil Kant Munjal are among the selling shareholders, according to the DRHP. The promoter and promoter group will, however, continue to hold more than 51% of the company’s shares.
Helped by the booming consumer demand for digital commerce, scores of Indian tech start-ups are looking to go public in the coming months. Food delivery firm Zomato led the pack with a stellar D-street debut in July. Fintech player Paytm is set to launch a `16,600-crore IPO later this year, the biggest since the `15,200-crore public issue floated by Coal India in 2010 while Mobikwik is eyeing a `1,900-crore IPO. Nykaa and PolicyBazaar are the latest start-ups to have set the pitch for a public market debut.
Led by Falguni Nayar, Nykaa plans to deploy a portion of the net proceeds to fund the establishment of new brick-and-mortar retail stores and warehouses.
Part of the fresh IPO funds will also be used towards marketing initiatives and “repayment or prepayment of outstanding borrowings availed by our company and one of our subsidiaries, namely Nykaa E-Retail,” the company said.
India, with its largest share of millennials and GenZ population, growing digital adoption and increased consumption from small towns aided by rising disposable incomes, presents significant tailwinds for the beauty and personal care (BPC) segment. The overall BPC spend in the country, which currently stands at about $15 billion, is estimated to grow at a 13% CAGR in the next five years. The share of the online spend is likely to grow at a considerable 30% CAGR during the period touching nearly $3.9 billion by CY25, analysts at HSBC said.
Vertical BPC players like Nykaa with its better consumer experience, extensive SKUs (stock keeping units) and omni-channel offerings stand to gain, they said. “The key strategy for companies such as Nykaa is not only to focus on the mass and premium brands but also offer luxury brands from companies such as Estée Lauder to customers. BPC companies have the highest gross margins; its order values are much healthier as well – almost at `4,000, for companies such as Nykaa as customers end up buying multiple or more premium products. Nykaa and Purplle are emerging as leaders,” the analysts said in a recent note.
Nykaa’s revenue from operations increased to `2,440.89 crore in FY21 from `1,767.53 crore in FY20 on a consolidated basis. The beauty retailer posted total comprehensive profits of `59.7 crore in FY21, reversing losses of `16.23 crore reported in FY20.
Nykaa’s lifestyle portfolio spans across beauty, personal care and fashion products. The company had cumulative downloads of 43.7 million across all its mobile applications as of March 31, 2021. The firm’s offline channel comprises 73 physical stores across 38 cities in India over three different store formats.
Nykaa said it offered approximately 2 million SKUs from 3,826 national and international brands to our consumers across business verticals as of March 31, 2021. The firm’s total GMV (gross merchandise value) stood at `4045.98 crore in FY21, registering an increase of about 50.7% over FY20.