FSN E-Commerce Ventures Ltd Archives

India is undoubtedly evolving as a global centre for entrepreneurs. With over 77,000 startups, India has emerged as the third-largest ecosystem for startups globally. India is home to 107 unicorns (startups with $1 billion valuation) as of September 2022! PayTM, OYO Rooms, BYJU’s, Ola Cabs, and Zomato are all examples of companies you may know that are unicorns.

In today’s article, we dive into India’s first women-led profitable unicorn, which has now emerged as one of the leading e-commerce enterprises— Nykaa!

Nykaa’s Origin

Falguni Nayar established FSN E-Commerce Ventures (the parent company of Nykaa) in 2012. The e-commerce platform housed only 3 employees and received a mere 60 orders when it was launched initially. With very little experience in the retail industry, technology, or even manufacturing, Nayar built Nykaa into one of India’s leading companies in the cosmetics and personal care market.

It was the inconsistencies she witnessed in the beauty products market that gave an initial boost to Falguni Nayar to launch her company. Despite the massive demand, the beauty and cosmetics market in India could not match the product range compared to those in other countries like France and Japan. Many products were unavailable in several locations across our nation— all of which contributed to the creation of Nykaa.

Currently, Nykaa sells beauty, wellness, and fashion products across websites, mobile apps, and 100+ offline stores. It offers products that are manufactured in India as well as internationally. Nykaa aims to create a world where its consumers have access to a finely curated and authentic assortment of products & services.

Recent Acquisitions

Up until this point, Nykaa has successfully acquired six companies. The company recently bought digital content delivery platform Little Black Book (LBB) in an all-cash transaction. On April 22, 2022, it procured New Delhi-based Nudge Wellness and Kica. Nykaa also secured an 18.5% stake in Earth Rhythm (a beauty brand) for ₹44.83 crore and also acquired Dot & Key (a skincare brand).

Nykaa’s IPO

FSN E-Commerce Ventures launched its initial public offering (IPO) on October 28, 2021. Shares of Nykaa made an amazing debut in the Indian stock markets and its market cap surged to almost ₹1,06,942 crore in November! The IPO made Falguni Nayar richer by almost $7 billion (₹52,315.55 crore), and she was crowned India’s wealthiest self-made female billionaire. As of October 2022, Nykaa has a market cap of nearly ₹57,310 crore.

Financial Performance

Nykaa is one among the few profitable e-tailers in India. It posted its first net profit of ₹61.94 crore in FY21. The profit after tax stood at ₹41.3 crore in FY22, a decline of 33% year-on-year (YoY). Revenue from operations soared 55% YoY to ₹3,773.9 crore during the same period. Nykaa also grew its store count by 43% YoY to 105 physical stores.

A key indicator in the e-commerce space is the Gross Merchandise Value or GMV. For Nykaa, the GMV is the monetary value of orders inclusive of taxes and gross of discounts. The company’s GMV grew 71% YoY to ₹6,933.2 crore in FY22.

During the quarter ended June 2022 (Q1 FY23), Nykaa’s net profit rose 42% YoY (or 18% QoQ) to ₹5 crore. Revenue stood at ₹1,157 crore, up 41% YoY. It posted a GMV growth of 47% YoY to ₹2,156 crore in Q1.

The Challenges

Over the past few years, Nykaa has launched a range of new products that also incorporate celebrity endorsements. Alongside this, they have also launched fresh collections to include in their personal brand. The platform provides a large selection of beauty products, but its fashion business is not performing too well.

Analysts and industry observers consider Nykaa’s fashion business the greatest distraction. Having entered the business in 2018, Nykaa is clearly a latecomer. It will have to battle it out with the likes of Myntra and Ajio, which have already made considerable inroads. It will also need to create a unique selling proposition (USP) in fashion. According to analysts, many customers say they are not aware that Nykaa has fashion offerings, or that there is anything different that the unicorn offers in fashion that others don’t.

Cosmetics e-commerce company Purplle is Nykaa’s biggest competitor. It is now valued at over a billion dollars after its $33 million fundraising round. With this, Purplle became the 102nd unicorn in India.

The Cosmetics Industry: An Overview

The global cosmetics segment is valued at $5.60 billion in 2022 according to a Statista report. The market is expected to grow at a CAGR of 5.22% during 2022-2026. This astounding expansion of the cosmetic industry is a result of both the industry’s quick digitalization and the rising demand for cosmetic products, mostly driven by young adults.

One of the major companies in the cosmetics sector is Nykaa, which boasts of its extensive selection of items for beauty, fashion, and health that it offers to both physical and digital customers. Nykaa stands as a leading company in the cosmetics and personal care market with a revenue of ~₹3,800 crore in 2022. It estimates turnover to reach ₹2,74,185 crore by 2027. Its valuation is higher than some of the oldest and the largest Indian businesses like Coal India, Bharat Petroleum, SBI Card, and Godrej Industries.

The company is aiming to expand its offline business. An alliance between Nykaa and Dubai’s Apparel Group too has been formed. The two entities will work together to develop a multi-brand beauty retail company within countries in the Gulf Cooperation Council. Nykaa will hold a 55% stake in the firm, while Apparel Group will hold 45%.

It plans to establish 180 outlets across India by 2024. To improve client experience, Nykaa is now eager to extend its fulfilment centres around the nation. Additionally, it intends to increase its warehousing capacity by 40%.

Nykaa’s Mission!

Since its debut, Nykaa has not only revolutionised and redefined the art of e-retailing beauty and personal care in India, but it has also played a significant role in promoting the development of a still-emerging ecosystem. Nykaa wants all its customer to discover their unique identity and personal style.

Nykaa’s founder, Falguni Nayar, is the richest self-made woman in India. She served with Kotak Mahindra bank for 18 long years. At the age of 50, she resigned to follow her entrepreneurial dream: Nykaa.com. Nayar’s passion for her business, attention to detail, and engagement in every aspect of the firm can be defined as some of the qualities that made her an excellent leader. She has also set a big example for the entire world and validated the saying, “age is just a number” when it comes to entrepreneurship.

Nayar is a source of inspiration to everyone in Nykaa and beyond as she continues to strive hard and break stereotypes. Will this omnichannel consumer-tech company further smash all records and secure a prominent space in international markets, or will it be confined to its regional presence? Let us know your views in the comments section of the marketfeed app!

What a thrilling year for startups! After Zomato, companies such as Paytm, Oyo, and MobiKwik are lining up to launch their IPOs. FSN E-Commerce Ventures Ltd, the parent company of Nykaa, has launched its initial public offering (IPO) today— October 28. It is a unicorn (startup with more than $1 billion valuation) led by women with a lot of growth potential. In this article, learn more about Nykaa and its IPO.

Company Profile – FSN E-Commerce Ventures (Nykaa)

FSN E-Commerce Ventures Ltd is a digitally native consumer technology platform. It delivers content-led lifestyle retail experiences to consumers. The company has a diverse portfolio of beauty, personal care, and fashion products. It sells cosmetics, clothes, and grooming products.

The company operates under two verticals:

Nykaa: Beauty and personal care
Nykaa Fashion: Apparel and accessories

FSN E-Commerce Ventures (Nykaa) was established in April 2012 by Falguni Nayar, a former investment banker. She ventured into beauty and cosmetics products as it was an underpenetrated segment in online e-commerce at that time. Now, her company has grown multi-fold into one of India’s top digital retail sites for beauty products. Nykaa is seeking a valuation of $7 billion (~Rs 52,315.55 crore)!

The company records ~1.5 crore average monthly unique visits and lists over 4,000 brands on its platform. They own six prominent brands— Nykaa Cosmetics, Nykaa Naturals, Kay Beauty, Nykd by Nyka, Twenty Dresses, and Pipa Bella. Apart from its online presence, Nykaa currently operates 80 physical stores across 40 cities in India. It has grown into one of the preferred destinations for certain luxury and prestige products in India for consumers and brands. The company also focuses on educating consumers via digital content, digital communities, and tech-product innovations, which is an integral component of its business model.

About the IPO

FSN E-Commerce Ventures’ public issue opens on October 28 and closes on November 1. The company has fixed Rs 1,085-1,125 per share as the price band for the IPO.

The fresh issue of shares (of the face value of Rs 1 each) aggregates to Rs 630 crore. The offer for sale (OFS) of up to Rs 4.19 crore equity shares from existing shareholders aggregates to Rs 4,721.92 crore. Individual investors can bid for a minimum of 12 equity shares (1 lot) and in multiples of 12 shares thereafter. You will need a minimum of Rs 13,500 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 168 equity shares (14 lots).

Objectives of the Issue

Nykaa will utilise the net proceeds from the IPO for the following purposes:

Investment of Rs 42 crore in subsidiaries FSN Brands and/or Nykaa Fashion for funding the establishment of new retail stores.
Rs 42 crore towards capital expenditure and investment in its subsidiaries Nykaa E-Retail, Nykaa Fashion, and FSN Brands for funding the set-up of new warehouses.
Rs 156 crore towards repayment or prepayment of outstanding borrowings availed by the company and one of their subsidiaries, Nykaa E-Retail.
Expenditure of Rs 234 crore for enhancing the visibility and awareness of its brands.
General corporate purposes.

The total promoter in the company holding will fall from 54.22% to 52.56% post the IPO.

Financial Performance

Nykaa has turned profitable in the financial year ended 2020-21 (FY21). Despite the Covid-19 pandemic hitting non-essential spending for more than a year, the company has reported a surge in revenues. It posted a net profit of Rs 61.94 crore in FY21, compared to a net loss of Rs 16.34 crore in FY20. The revenue from operations rose 38.1% year-on-year (YoY) to Rs 2,440.8 crore in FY21. Nykaa reported a 35.3% increase in total orders to 1.71 core over the previous year. Thus, it has a capital-efficient business model with a combination of strong growth and profitability.

The company’s online business has been growing rapidly, with cumulative downloads of nearly 4.37 crore across all its mobile applications.

While the company’s domain was the Beauty and Personal Care segment, it has made considerable progress in its Fashion segment. A key indicator in the e-commerce space is the Gross Merchandise Value or GMV. It indicates the value of goods and services that are sold on a marketplace at a given point in time. For Nykaa, the GMV is the monetary value of orders inclusive of taxes and gross of discounts. In FY21, the GMV in Beauty and Personal Care segment was Rs 33,804.10 crore, which is the amount of goods sold by the company inclusive of taxes and discounts before return or cancellation.

Risk Factors

The failure to acquire new customers in a cost-efficient manner may affect the company’s profitability.
Nykaa’s core business depends heavily on the growth of India’s online commerce industry and its ability to effectively respond to changing user behaviour on digital platforms.
There are pending litigations against the company, its subsidiaries, and its directors. Any adverse decisions in legal proceedings may render them liable to penalties.
Failure to identify and effectively respond to changing consumer preferences, spending patterns, and changing fashion trends in a timely manner may harm Nykaa’s overall operations.
Changing regulations in India could lead to new compliance requirements that are uncertain.
Any harm to the company’s brand or reputation may adversely affect its financial condition and cash flows.

IPO Details in a Nutshell

The book-running lead managers to the public issue are BofA Securities India, Citigroup Global Markets India, ICICI Securities, JM Financial Consultants, Kotak Mahindra Capital, and Morgan Stanley India.

Ahead of the IPO, the company was able to raise Rs 2,396 crore from 184 anchor investors.

Conclusion

The first two weeks of November will be raining with IPOs. Mostly tech IPOs such as Paytm, PolicyBazaar, Nykaa, and MobiKwik. The IPOs are coming out all at once with extremely high valuations and buzz in the market. It might leave the market out of liquidity. Nykaa is the first IPO going up in November and might therefore have a first-mover advantage. The company has grown significantly in a very small period, much faster than its other tech-commerce peers.

Nykaa scored two consecutive losses in the past financial years. According to SEBI regulations, the company needs to offer not less than 75% of the Net Offer to Qualified Institutional Buyers (QIBs). This will bring down the retail quota from 35% to 10% as is the requirement laid down by SEBI. Therefore, retail investors like you and me have a lesser chance of getting an allotment.

In today’s trend and time, wherein tech startup giants have extremely inflated valuations supported by the post-COVID market boom, it is difficult to project where these stocks might be headed. Just like its tech peers, Nykaa too is on the same path. The company’s growth has been good, it recorded a net profit last year despite the Covid-19 pandemic. Its key metrics hint towards a flourishing business. Even if one was to say that Nykaa is overvalued, one cannot question its growth metrics. Conclusively, there is considerable room for Nykaa’s IPO to be a successful one.

What are your views on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.