Nykaa was founded under FSN E-Commerce Ventures Limited in 2012 by Falguni Nayar and Sanjay Nayar. Today Nykaa is the leading personal care & multi-brand fashion and beauty platform of the Country. Nykaa is currently one of the few profitable business unicorns in the Country. The Company has approximately 8% in the E-Commerce sector in the Beauty, Healthcare and Fashion Industry. It is a consumer technology platform, which has expanded and diversified its product portfolio to its lifestyle retail store segments. In this article, we take a closer look at the Nykaa IPO Review and its possible future prospects.
The Company is engaged in business in two major verticals:
- Nykaa: Beauty and personal care
- Nykaa Fashion: Apparel and accessories
The business model of the Company is inventory-based. The Company also manufactures its products in the personal care and beauty care category. These products are available in their exclusive stores and online platform of Nykaa Cosmetics, Kay Beauty and Nykaa Naturals. The Company’s other business upfront of the Apparel and accessories has 1,350 brands and 1.8 million SKUs operating in the fashion products division.
OBJECTS OF THE IPO ISSUE:
- Prepayment of all the loans of the Company, which be availed on a consolidated basis.
- To meet corporate targets.
- To fund the working capital requirement.
BASIS OF THE NYKAA IPO OFFER:
- NFSN E-Commerce is one of India’s biggest and largest companies operating in the retail segment. The Company has a high focus on technology platforms with a lifestyle and fashion sector.
- The Company has marked solid growth and earnings objective in the past.
- The Company has a strong business model and a solid inventory.
- The founder and the management team of the Company are very renowned and an expert with high skills, knowledge and experience.
- The online platform and the Company’s retail stores are the hub for premium and prestige products in the healthcare, beauty, and fashion industry.
- The Company is highly capital-efficient and resilient.
NYKAA IPO DETAILS:
FSN E-commerce ventures limited is the parent company of Nykaa. The Company has its headquarters in Mumbai. The Company recently got approval from SEBI to float its IPO in the market. The IPO consists of new equity shares worth Rs.630 crore and an OFS brought forward by the promoter and selling stakeholders, including TPG and Lighthouse PE Firms. The OFS is 43,111,670 equity shares of the Company.
The Company has planned an Rs.420 million CAPEX plan to restructure its retail stores and investment in new retail stores and its subsidiaries. It has also planned to fund almost Rs. One thousand five hundred sixty million for the repayment of loans and their outstanding dues. The Company has reserved a sum of Rs.2,340 million to enhance brand awareness and visibility to promote customer support in their business outlook and general corporate business. Check Day by Day IPO Subscription Details (Live Status)
| IPO Opening Date | 28 October 2021 |
| IPO Closing Date | 01 November 2021 |
| Issue Type | Book Building Type |
| Face Value | Rs.1/ Equity Share |
| IPO Price | Rs. 1085 – 1125 per equity share |
| Market Lot | 1 lot of 12 Equity Shares |
| Minimum Order Quantity | 12 |
| Minimum Order Quantity Amount | Rs. 13,500 |
| Maximum Order Quantity | 168 Equity Shares in 14 Lots |
| Maximum Order Quantity Amount | Rs. 189,000 |
| Listing At | BSE, NSE |
| Issue Size | Rs. 5351.92 Crore |
| Fresh Issue | Rs. 630 Crore |
| Offer for Sale | 43,111,670 Equity Shares |
| Basis of Allotment Date | 09 November 2021 |
| Initiation of Refunds | 10 November 2021 |
| The Credit of Shares to Demat Account | 10 November 2021 |
| IPO Listing Date | 11 November 2021 |
| Basis of the Allotment Type | % Of the IPO Offer |
| Qualified Institutional Buyer | 75 |
| Non-Institutional Investor | 15 |
| Retail | 10 |
STRENGTHS AND GROWTH ASPECTS OF NYKAA IPO:
- The Company will benefit from the growth in the retail industry, beauty and personal care and premium fashion industry. It is expected that the industry will increase to 91.2 trillion from 54.8 trillion in the next 3 years.
- The Company is a leading personal care & multi-brand fashion and beauty platform in the Country.
- The Company also enjoys a big market share in the beauty, premium fashion, personal care, designer clothing, and affordable clothing segment. As per many estimates, their market share will be around Rs.10.6 trillion in 2025.
- The Company runs its business operation mainly based on inventory. It helps the Company ensure that their products reach the customers directly from the brand store or the authorized distributors. It also helps them to maintain the trust of the customers along with the authenticity of the product.
- The Company also launched its Mobile Application and Website for easy order placement.
- The Company has diversified its business outlook by making three new retail segments: Nykaa Kiosks, Nykaa Luxe and Nykaa On Trend. These physical retail segments are present in 38 cities with 73 outlets.
- The Company has 197,195 SKUs and a brand portfolio of 2,476 brands under all the different product portfolio services.
- The Company has a dedicated research team that helps them to maintain their portfolio’s breadth. It also helps them to understand the demand, customer interest with all the latest trends in the market. It helps them to serve a more diverse clientele.
- The Company recently carried out fundraising of $145.9 million in 12 different sessions. The Company has a strong investor base with 15 different investors holding a stake in the Company.
- The Company also carried out the acquisition of Pipa. Bella in April 2021.
- The Company has a strong financial risk profile backed by a strong capital structure and efficient debt protection in risk management policies.
- The focus of the Company is to grow and expand in the untapped market.
- The Company has a good and long-term relationship with established brands, reputed principals and a business profile with an omni-channel presence.
- The Company is engaged in a business that helps them to carry out a quick cash conversion cycle. As a result, the Company overall has a net healthy cash flow and strong liquidity presence.
- The Company also has a solid relationship with its vendors. It ensures a limited inventory risk.
- The Company’s debt protection metrics have registered an improvement from the last two years. It is based on the improvement of the Company in terms of operating margins.
- The Company has a strong interest coverage. The ratio is currently at 5.8 times.
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WEAKNESS AND THREATS OF NYKAA IPO:
- The Company will not promote its revenue if Company can’t draw in new clients and cost-effectively promote its strategy.
- Any harm to their image could adversely affect the business operation of the Company.
- The Company is also vulnerable to pressure due to the sale of its products.
- The Company is engaged in business that is very competitive. The failure to contend effectively could influence the Company on both top-line and bottom-line.
- The Company will also face challenges due to change in consumer spending, which COVID-19 brings.
- The effect of the COVID-19 has a contrary impact on the business operation of the Company.
- The Company also needs to follow and comply with the changing rules, guidelines, regulations, and principles.
- The Company is also vulnerable to change in customer interests, demand and the changing pattern of the fashion and beauty industry.
- The business of the Company would endure in case the Company couldn’t implement its growth strategy properly.
- The business model of the Company is an inventory model. The Company carries out its inventory in expectation of sales prospects. The Company’s inventory will be hampered if their sales are not as per their expectations.
- The business’ irregularity of the Company affects their quarterly results and puts weight on their tasks.
- The Company will be affected if it registers higher loss from its core business, the retail segment.
- In the intense competition in the retail segment, the Company needs to provide discounts and other attractive schemes to attract customers regularly. It can hamper the Margins of the Country along with their financial parameters.
- The Company is vulnerable to the risk of new stores stabilization. The Company has a plan to increase 50-70 retail stores every year until 2025.
- The future growth aspect of the Company will highly depend on its brand image, sustainable growth margins and leveraging ability.
- The Company’s operational model is a COCO, Company Owned and Company Operated model. In this business model, the Company’s growth is slow, and the breakeven point is reached only when the optimal volumes are attained. As a result, the Company needs to attract its customers and hold schemes for loyalty incentives.
Also Read : List of MainLine IPO’s in India.
Also Read : List of SME LINE IPO’s in India.
FINANCIAL TRENDS OF NYKAA IPO:
| Particulars | For the year ended (in Cr.) | ||||
| 31-Mar-21 | 31-Mar-20 | 31-Mar-19 | |||
| Total Assets | 1,301.99 | 1,124.48 | 775.66 | ||
| Total Revenue | 2,452.64 | 1,777.85 | 1,116.38 | ||
| Profit After Tax | 61.95 | (16.34) | (24.54) |
| PARAMETER | MARCH 21 | MARCH 20 | YoY % |
| Core EBITDA Margin (%) | 6.48 | 4.85 | 33.69 |
| EBIT Margin (%) | 4.03 | 1.79 | 124.77 |
| Pre-Tax Margin (%) | 2.71 | -0.82 | 429.47 |
| PAT Margin (%) | 2.53 | -1.30 | 294.10 |
| Cash Profit Margin (%) | 5.46 | 2.35 | 132.18 |
| ROA (%) | 5.34 | -2.53 | 311.21 |
| ROE (%) | 15.56 | -8.56 | 281.81 |
| ROCE (%) | 15.53 | 5.98 | 159.53 |
| Asset Turnover(x) | 2.12 | 1.94 | 8.82 |
| Sales/Fixed Asset(x) | 6.41 | 6.55 | -2.11 |
| Working Capital/Sales(x) | 9.10 | 11.57 | -21.32 |
| Fixed Capital/Sales(x) | 0.16 | 0.15 | 2.16 |
| Receivable days | 13.09 | 20.95 | -37.53 |
| Inventory Days | 70.89 | 71.73 | -1.16 |
| Payable days | 50.45 | 49.93 | 1.05 |
| Net Sales Growth (%) | 38.10 | 52.50 | -27.44 |
| Core EBITDA Growth (%) | 76.61 | 221.55 | -65.42 |
| EBIT Growth (%) | 210.40 | 789.23 | -73.34 |
| PAT Growth (%) | 368.04 | 12.98 | 2735.02 |
| EPS Growth (%) | 355.61 | 13.75 | 2485.59 |
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PROMOTERS OF NYKAA IPO:
The promoters of the company are:
- Falguni Nayar
- Sanjay Nayar
- Falguni Nayar Family Trust
- Sanjay Nayar Family Trust
Currently, the Company is valued at the valuation of Rs.53,200 crore, the promoter stake of the Nayar Family is at the valuation of Rs.28,700 crore.
| Pre-Issue Share Holding | 54.22% |
| Post Issue Share Holding | 52.56% |
CONTACT DETAILS:
Nykaa E-Retail Pvt. Ltd
104, Vasan Udyog Bhavan, Sun Mill Compound,
Tulsi Pipe Road, Lower Parel,
Mumbai 400 013, Maharashtra
Telephone: + (91) 22 6614 9616
E-mail: nykaacompanysecretary@nykaa.com
Website: www.nykaa.com/
REGISTRAR:
Link Intime India Private Limited
C-101, 1st Floor, 247 Park
Lal Bahadur Shastri Marg
Vikhroli (West)
Mumbai 400 083, Maharashtra
Telephone: +91 22 4918 6200
E-mail: nykaa.ipo@linkintime.co.in
Website: www.linkintime.co.in
LEAD MANAGER(S):
- Kotak Mahindra Capital Company Limited
- Morgan Stanley India company Private limited
- BofA Securities India Limited
- Citigroup Global Markets India Private Limited
- ICICI Securities Limited
- JM Financial Limited
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