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India Beauty Platform Nykaa Aims for IPO

NEW DELHI — Seeking a valuation of about $4 billion, online beauty player Nykaa, the largest in its space in India, has filed with the regulatory SEBI for an initial public offering with the Securities and Exchange Board of India.

In a sector dominated by global players — U.S. e-commerce giants Amazon and Walmart-owned Flipkart, and by the likes of Sephora in brick-and-mortar — Nykaa’s plans to offer up to 43 million shares worth 5.25 billion rupees, or $70.8 million, is seen by industry analysts as timely despite the pandemic.

“Nykaa is clearly India’s number-one pure-play e-commerce niche player — it’s a great brand both for consumers and consumer goods companies,” said Abneesh Roy, executive director at Edelweiss Financial Services. “When you speak about Hindustan Unilever, Dabur, Marico, Emami, L’Oréal — they are all present on Nykaa as a platform and are happy with the customer profile and the kind of sales they are getting on it. So are premium and global brands. Their strong omni presence is good, with 73 [brick-and-mortar] stores. In beauty and personal care, that is important because consumers really like to see how the products fit for them, it gives the customer both comfort and a sense of authenticity.”

The global Nykaa marketplace gives Indian consumers access to brands that are not available elsewhere in India, while the platform also offers labels such as Estée Lauder, Christian Dior, Guerlain, Bulgari and Huda Beauty. Analysts reiterated the attraction of a niche player that has sprung up to provide a strong retail presence in the $16 billion Indian beauty market, which has been growing at 12 percent annually even over the last year, and which is expected to reach $28 billion by 2025.

Nykaa, which launched in 2012, has diversified over the last few years and now has verticals for men’s, luxury, and private label beauty, while adding categories such as fashion, jewelry and home decor. It has made two major acquisitions in the fashion and jewelry space in the last two years.

Beauty remains the largest piece of its business: Of its total gross merchandise value of 40.45 billion rupees, or $545 million, in the financial year ended March 31, beauty accounted for 33.80 billion rupees, or  $455.4 million, of that. The company saw an increase in GMV of 50.7 percent over the previous year and became profitable for the first time with a restated profit of 619.45 million rupees, or $8.35 million, as compared to a loss of 163.40 million rupees, or $2.2 million, in the previous year.

Revenue from operations in the year ended March 31 was 24.40 billion rupees, or $275 million, an increase of 38.1 percent year-over-year.

The filing for an IPO with the SEBI is being hailed as a milestone for Indian markets as Nykaa is one of the few start-ups going for a stock market listing after declaring a profit. It also is one of the rare Indian companies led by a woman, founder and chief executive officer Falguni Nayar, a banker-turned-entrepreneur.

Abeesh Roy pointed out that the beauty segment in India has also benefited from several more focused moves by Nykaa, including strong segmentation of verticals and a considerable inventory. “They have segmented the consumer in a very good way, with divisions within beauty, including men’s, naturals and then realizing the same consumer would be drawn to fashion and jewelry. They also benefited from introducing private labels, which are more profitable because you control the entire value chain and there is no revenue share with the brands,” he said.

“The other advantages Nykaa has is that of an inventory model, which has been particularly successful in the beauty space in India, not only for faster delivery, but because the possibility of counterfeit is lower because of more direct sourcing. There is competition of course, with other e-commerce players, consumers do visit all the popular sites, but a niche and focused play helps. Nykaa has more than 2 million stock keeping units, and it had close to 17 million orders placed in the beauty and personal care in this financial year,” he added.