Nykaa IPO. Is it Worth Subscribing?

Business Introduction:

Nykaa, an omnichannel startup founded in 2012 by FSN E-Commerce Ventures, has revolutionized the way Indians purchase beauty items. Falguni Nayar, a former investment banker, founded the company with the goal of delivering beauty items to women in distant areas of India.

Their firm expanded as a result of the appropriate marketing and warehousing investments. Nykaa is now primarily an online lifestyle technology platform aimed at Indian men and women. It sells approximately 100 items per minute. It sells everything from high-end dresses to health supplements.

As of March 31, 2021, the company’s Beauty and Personal Care Offering included 197,195 SKUs from 2,476 brands, predominantly in cosmetics, skincare, haircare, bath and body, fragrance, grooming appliances, personal care, and health and wellness categories.

Nykaa’s business model for beauty and personal care is primarily inventory-driven. The company makes and distributes its own brand beauty and personal care products through third-party manufacturers under the brand names “Nykaa Cosmetics,” “Nykaa Naturals,” and “Kay Beauty.”

The apparel and accessories verticals include over 1,350 brands and over 1.8 million SKUs that span four customer segments: women, men, children, and home. Additionally, Nykaa Fashion owns six brands.

The company offers its clients an omnichannel buying experience by offering both online and offline shopping channels. Online channels include mobile apps, websites, and mobile sites, while the offline channel has 73 physical locations in 38 cities across India.

About founders:

The offer comprises shares in the company’s founders and promoters, Falguni and Sanjay Nayar. They and their respective family trusts own approximately 54.3 percent of the stock or approximately 25.3 crore shares.

IPO Details:

Sl. NoParticularsInformation
1IPO Issue opens onOctober 28, 2021
2IPO Issue closes onNovember 1, 2021
3Issue TypeBook Built Issue IPO
4Face ValueRs. 1 per equity share
5IPO PriceRs. 1,085 - 1,125 per equity share
6Minimum Order Quantity1 lot = 12 Shares, Amounting Rs. 13,500
7Maximum Order Quantity14 lot = 168 Shares, Amounting Rs. 1,89,000
8Listing AtNSE and BSE
9Issue SizeAmount aggregating up to Rs. 5,351.92 crore
10Fresh IssueAmount aggregating up to Rs. 630 crore
11Offer for SaleAmount aggregating up to Rs. 4,721.92 crore
12Allotment dateNovember 8, 2021
13Initiation of RefundsNovember 9, 2021
14Credit of share to Demat AccountNovember 10, 2021
15IPO Listing dateNovember 11, 2021

Objects of the Issue:

Investment of 420 million in certain of their subsidiaries, namely FSN Brands and/or Nykaa Fashion, for the purpose of financing the establishment of new retail stores; 420 million in capital expenditure to be incurred by the company and investment in certain of their subsidiaries, namely Nykaa E-Retail, Nykaa Fashion, and FSN Brands, for the purpose of financing the establishment of new warehouses; 1,560 million in repayment or prepayment of outstanding borrowings obtained by the company and one of 420 million

Financial Information:

Despite the pandemic, Nykaa’s overall revenue increased 38% from FY20 to FY21. Nykaa reported a profit of 61.94 crores in FY 2021, up from a loss of 16.34 crore in 2020.

This was primarily attributable to the growth in revenue from online shopping operations.

Nykaa is expected to gain from the rising beauty, personal care, and fashion industries, as well as the ubiquity of digital media. Only time will tell.

Particulars (In crores)Jun-21FY21FY20FY19
Total Assets1,631.481,301.991,124.48775.65
Revenue from operations821.712,452.631,777.851,116.38
Net profit3.5261.94-16.34-24.53

Company Opportunity & Strength:

  • Constant client engagement through makeup, health, and beauty workshops
  • Extensive product line, exploding customer selectionβ€”houses thousands of brands
  • both a physical and an online presence
  • Possessing one’s own warehouse. assures product availability and timely delivery.
  • owned brands that provide customers with a variety of choices.
  • Actors, specialists, and vloggers lend their support to brands.
  • The growth of India’s e-commerce sector provides a fantastic opportunity for Nykaa to thrive.
  • The advancement of Artificial Intelligence may assist Nykaa in attracting additional customers. manage their expectations and ensure that all of their requirements are met.
  • The increase in social media followers may result in an increase in the consumer base.

Company Threats & Weakness:

  • Competition from e-commerce behemoths such as Amazon and Flipkart
  • The beauty and skincare industries are becoming increasingly competitive.
  • On the black market, you might find cheaper and counterfeit goods.
  • Amendments to India’s consumer protection laws that may have a negative impact on operations and financials

Management Analysis:

Ms. Falguni Nayar (Executive Chairperson, Managing Director, and Chief Executive Officer).  She has over 26 years of experience in e-commerce, investment banking, and broking. Prior to founding our Company, she was associated with Kotak Mahindra Capital Company Limited for 18 years where she also served as a managing director.

Risk Factors:

  • Business success is contingent upon the expansion of India’s online commerce industry and the ability to adapt effectively to changing user behavior on digital platforms.
  • The company is currently embroiled in litigation.
  • Business success is contingent upon user behavior and the continuous adoption of digital platforms.
  • Changing rules in India may result in new, unknown compliance obligations.
  • Nykaa derives a sizable amount of its GMV from the top three categories, and the business may suffer if items in these categories underperform expectations.

Industry Overview:

  • India’s beauty and personal care sector is expected to nearly double in size.
  • The Indian fashion market is expected to grow at a rate of more than double that of the global market.
  • The retail market is growing at a compound annual growth rate (CAGR) of 11%.
  • The retail market for non-essential items is growing at a compound annual rate of 17%.

Conclusion:

Positives include a high growth potential and a varied and well-curated product portfolio. However, the appraisal requires considerable prudence.

Considering the scope of operations, the strength of the management team, the profitability of the business, and the high growth prospects in the industry as a result of significant under penetration, we feel that the company has effectively formed an industry.

The company intends to use the revenues from the IPO to expand by opening more retail locations and warehouses. Additionally, it intends to repay part of its debt, which should lower interest expenses and further bolster profitability.

The majority of brokerages view the IPO favorably and have assigned it a subscribe rating. However, some veteran investors have sent a cautionary note to investors. Due to its tremendous monetary value. People are investing in companies whose valuations can be justified if their earnings potential is tenfold what is stated.

IPO Ratings:

Sl. NoParticularsRating (Out of 10)
1Business Prospects9
2Financial Information8
3SWOT8
4IPO Valuation7
5Overall8

How to apply for – IPO?

Steps to be followed to apply for β€œNykaa” via Zerodha console:

Step 1: Visit the Zerodha website and log in to Console.

Step 2: Go to Portfolio and click the IPOs link.

Step 3: Go to the β€œ Nykaa ” row and click the β€˜Bid’ button.

Step 4: Enter your UPI ID, Quantity (In lots), and Price.

Step 5: β€˜Submit’ IPO application form.

Step 6: Visit the UPI App (net banking or BHIM) to approve the mandate.

Do not have a brokerage account? Apply for Zerodha – India’s top brokerage service.

Disclaimer: All the information on this website is published in good faith and for general information purpose only.

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