Assignment

MBA 2023-2025
Term III
GROUP 13

Member Name MBA ID

Dipti Bhoye MBA23071
Sonam Raut MBA23185
Aarohi Bapat MBA23003
Praveenkumar S MBA23172
Sankala Harsha Vardhan MBA23211
Noorunisa PM MBA23154

As a Part of the coursework of

Financial Institution Management
Of Indian Institute of Management, Jammu

Under the guidance of

Harsha Jariwala
Assistant Professor

10th March,2024
 IPO Analysis of Nykaa

About the Company

Nykaa is an Indian e-commerce firm that offers cosmetics, wellness, and fashion items through
its portals, apps, and 76 physical locations in India. Falguni Nayar, a senior managing director at
Kotak Mahindra Capital Firm, started it in 2012 as a billion firm. It offers items made in India
and those made elsewhere in the world.
The firm transitioned from a web-based to an omnichannel business in 2015 and started selling
things other than beauty products. It introduced Nykaa Pro in 2020, and Nykaa Fashion began
operating in Delhi in December 2020, with the goal of making its fashion company
omnichannel. It also began selling over 2,000 labels and 200,000 items through its multiple
networks. Several women who desire to begin their own e-commerce firms can draw ideas from
this company.

Target market of Nykaa fashion

Nykaa's target demographic is between the ages of 22 and 35. Falguni Nayar established
Nykaa, an Indian e-commerce company based in Mumbai, in 2012. Falguni Nayar, a former
general manager of Kotak Mahindra Capital Company, founded Nykaa in April 2012.

Business Model
While Nykaa Fashion doesn't disclose a detailed business model publicly, based on Nykaa's
overall strategy, we can infer the following:
• Inventory-based model: Similar to Nykaa's beauty segment, Nykaa Fashion likely
follows an inventory-based model. This means they purchase clothing and accessories
directly from brands or distributors and store them in warehouses. They then sell these
products through their own online platform (https://www.nykaafashion.com/)
• Omnichannel approach: Nykaa has physical stores for beauty products. It's possible
Nykaa Fashion might integrate with these stores in the future, allowing customers to
browse or pick up fashion items.
• Focus on curation and discovery: Nykaa excels at curating beauty products and
offering a discovery platform for customers. Nykaa Fashion might use a similar
approach to select trendy and high-quality fashion items, making it easier for
customers to find what they're looking for.
• Brand partnerships: Nykaa has its own in-house beauty brands. Nykaa Fashion
might explore private label clothing lines or collaborate with established fashion
brands for exclusive collections.
• Technology and data-driven approach: Nykaa leverages technology for logistics,
personalized recommendations, and marketing. Nykaa Fashion is likely to use similar
 strategies to offer a seamless shopping experience and target customers with relevant
fashion recommendations.
• Building on Nykaa's strengths: Nykaa has a strong brand reputation and loyal
customer base. Nykaa Fashion can leverage this existing customer trust to gain a
foothold in the competitive fashion e-commerce market.
• Evolving Model: Nykaa Fashion is a relatively new venture. The company might
adapt and refine its business model based on customer response, market trends, and
competitor strategies.
• By combining these elements, Nykaa Fashion can position itself as a trusted
destination for curated and trendy fashion in the Indian market.

Key Management Personnel of Nykaa fashion:

Falguni Nayar-Executive Chairperson, Managing Director and CEO
Anchit Nayar-Executive Director, CEO – Beauty E-Commerce
Adwaita Nayar-Executive Director, CEO – Nykaa Fashion
Nihir Parikh-CEO – Nykaa Man, COO – Nykaa Fashion
Manoj Jaiswal-Chief Supply Chain Officer
Surender Mehta-Chief Human Resource Officer
Rajesh Uppalapati-Chief Technology Officer
P. Ganesh-Chief Financial Officer
Vishal Gupta-CEO – Nykaa Distribution, EVP - Beauty Private Label
Sujeet Jain-Chief Legal and Regulatory Officer

Promoter or Promoter’s group for Nykaa fashion:

Falguni Nayar, Sanjay Nayar, Falguni Nayar Family Trust and Sanjay Nayar Family Trust are
the key promoters. They have a 45.99% shareholding in the company. The total shareholding,
including that of the promoter group, is 54.22%.

Group companies capital structure for Nykaa fashion:

It's authorized share capital is INR 200.00 cr and the total paid-up capital is INR 25.01 cr.
Nykaa Fashion Limited's operating revenues range is INR 100 cr - 500 cr for the financial
year ending on 31 March, 2023. It's EBITDA has decreased by -81.45 % over the previous
year.
SWOT analysis for Nykaa
A SWOT analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats of a business, project, or individual. It involves identifying the
internal and external factors that can affect a venture’s success or failure and analyzing them
to develop a strategic plan. In this article, we do a SWOT Analysis of Nykaa
Strengths
Diverse Product Portfolio: Nykaa offers a wide range of beauty, personal care, and fashion
products. This diversification ensures they cater to a broad spectrum of consumer preferences
and needs.
Strong Brand Recognition: Since its inception, Nykaa has successfully positioned itself as a
trusted brand in India’s beauty and personal care segment. The brand is synonymous with
authenticity, especially in a market where counterfeit beauty products are a concern.
Omnichannel Presence: Nykaa has effectively integrated its online and offline presence. Its
physical stores in various cities complement its online platform, offering consumers multiple
touchpoints and enhancing brand visibility. What marketing strategy makes Nykaa so unique?
Curated Content & Community Building: Nykaa has invested significantly in creating
content, including beauty tutorials, expert reviews, and articles. This drives customer
engagement and positions Nykaa as an authority in the beauty industry.
Private Label Offerings: Nykaa can achieve better profit margins with its personal label
products. These in-house brands also allow Nykaa to have exclusive products not available
on competing platforms.
Data-Driven Insights: As an e-commerce platform, Nykaa has access to vast amounts of
consumer data. This data can be analyzed to derive insights about consumer preferences,
buying patterns, and emerging trends, helping them stay ahead of the curve.
Collaborations and Exclusivity Deals: Nykaa has successfully collaborated with various
brands and influencers to launch exclusive products. Such collaborations differentiate Nykaa
from other platforms and create buzz and excitement among its user base.
Loyal Customer Base: Owing to its emphasis on authenticity, quality, and customer service,
Nykaa has built a loyal customer base. Repeat customers provide a stable revenue stream and
lower customer acquisition costs.
Weaknesses
Supply Chain Complexities: Managing a vast inventory of beauty and personal care
products, especially perishables, requires a robust supply chain. Any disruptions or
inefficiencies can lead to stock-outs or increased holding costs.
Dependence on Third-Party Brands: Many of Nykaa’s offerings consist of third-party
brands. This dependency means they have less control over product availability, pricing, and
authenticity.
Intense Competition: The beauty and personal care e-commerce segment has seen a rise in
competition, with giants like Amazon, Flipkart, and specialized platforms entering the space.
Maintaining a competitive edge and market share in such an environment can be challenging.
Operational Costs of Physical Stores: While Nykaa’s omnichannel strategy has its
strengths, operating physical stores also comes with high operational costs, including rents,
staffing, and maintenance.
Challenges in Scaling Private Label: While Nykaa’s private label offers higher margins,
scaling it to match the diversity and recognition of established brands can be challenging.
Counterfeit Products Concerns: Even though Nykaa is known for its commitment to
authenticity, the beauty industry is rife with counterfeit products. Ensuring that every product
sold on the platform is genuine requires constant vigilance.
Regulatory and Compliance Issues: Operating in the beauty and personal care segment
requires adherence to various product safety, authenticity, and quality regulations. Ensuring
compliance can be resource-intensive.
Opportunities
Expansion into New Categories: Nykaa can further diversify its product offerings by
venturing into new beauty, wellness, or fashion sub-categories, tapping into evolving
consumer needs.
Geographical Expansion: While Nykaa has a robust presence in major Indian cities, there’s
ample opportunity to expand in tier-2 and tier-3 cities and even internationally, where the
demand for beauty and personal care products is growing.
Enhanced Digital Experience: Leveraging augmented reality (AR) and artificial intelligence
(AI) can provide a more immersive shopping experience, allowing users to virtually “try on”
makeup or outfits before making a purchase.
Strengthening Private Labels: Nykaa can invest more in developing and promoting its
private labels, yielding higher margins and giving them a unique market positioning.
Sustainability and Clean Beauty: There’s a rising global trend towards sustainable, organic,
and clean beauty products. By increasing its offerings in this segment or introducing eco-
friendly practices, Nykaa can tap into this conscious consumer base.
Subscription Models: Introducing subscription boxes or loyalty programs can ensure a
consistent revenue stream and enhance customer loyalty.
Collaborations and Partnerships: Collaborating with influencers, celebrities, or
international beauty brands can lead to exclusive product launches and collections, drawing
more traffic and sales.
Men’s Grooming and Personal Care: India’s men’s grooming market is rapidly growing.
Expanding and curating offerings in this segment can capture a larger share of this
burgeoning market.
Health and Wellness: With the increasing focus on health and wellness, Nykaa can expand
its range in nutritional supplements, fitness products, and holistic wellness solutions.
Technology Integration in Physical Stores: Implementing tech-driven solutions in physical
stores, like virtual trials, smart mirrors, or personalized recommendations based on online
shopping history, can elevate the in-store shopping experience.
Threats
Intense Competition: Nykaa faces stiff competition from other e-commerce giants like
Amazon and Flipkart, as well as specialized beauty platforms and direct-to-consumer brands.
These competitors can offer aggressive pricing, exclusive deals, or enhanced services.
Changing Consumer Preferences: The beauty and fashion industries are notoriously fickle,
changing consumer preferences rapidly. Keeping up with these changes and staying relevant
is always a challenge.
Regulatory Changes: The beauty and cosmetics industry is subject to strict regulations,
especially concerning product safety and ingredients. Any sudden regulatory changes or
stricter norms could impact the products Nykaa sells.
Economic Fluctuations: Economic downturns or recessions can lead to decreased consumer
spending, affecting discretionary purchases like beauty and fashion products.
Technological Disruptions: The rise of new e-commerce technologies or platforms can pose
a threat if Nykaa doesn’t adapt quickly.
Counterfeit Products: The beauty industry is plagued by counterfeit products. While Nykaa
prides itself on authenticity, the proliferation of fakes in the market can erode trust in online
shopping platforms.
Supply Chain Disruptions: Factors like geopolitical tensions, pandemics, or natural
disasters can disrupt supply chains, affecting inventory and deliveries.
Operational Challenges in Physical Stores: Changing rental dynamics, local disruptions, or
competition from other retail outlets can impact the profitability and operation of
Nykaa’sphysical stores.
Data Security and Privacy Concerns: As a digital platform, Nykaa manages vast amounts
of customer data. Any data breaches or privacy concerns can lead to a loss of customer trust
and potential legal repercussions.
Shift to Direct-to-Consumer Brands: Many brands focus on building their online presence,
bypassing platforms like Nykaa. This direct-to-consumer approach could reduce the range of
exclusive products available on Nykaa.
Dividend Distribution Policy: FSN E-Commerce Ventures Nykaa had last declared a dividend
of 0.00% for the year ending March 2023.
Growth, Opportunities, Risks Factors & More statements
India’s online beauty and personal care market is estimated to reach $5.4 Bn by 2025, with an
online penetration of 18%. The 10-year compound annual growth rate (CAGR) between 2015
and 2025 is 50% compared to 28% of the US. Rising internet adoption and a large millennial
and the generation Z population have further increased the significance and utility of the
consumer internet business in India.
Nykaa, a digital native marketplace and a D2C brand primarily catering to beauty and
personal care (BPC) consumers in India, is the market leader in this segment where similar
players like Purplle, SUGAR Cosmetics, Pureplay, Mama earth and MyGlamm are also
competing.
However, Nykaa’s position of strength can be readily ascertained as the company had the
highest revenue share (18.5%) in the total addressable online BPC market in FY20, while its
peers mentioned here held less than 2% market share.
Backed by the likes of Fidelity, TPG Growth, Steadview Capital and others, Nykaa raised
more than $145 Mn from 15 well-known global and Indian investors. The company clocked
an operating revenue of $333 Mn in FY21, a 38% increase compared to $241 Mn in FY20. It
is currently seeking a valuation worth $7.4 Bn through its IPO on October 28, 2021.
Although Nykaa leads the online beauty and personal care market in India, it is important to
understand its long-term potential in this fiercely competitive space. To ensure a clear
understanding of the same, Inc42 Plus has released Nykaa Pre-IPO Analysis: Growth,
Opportunities, Risks & More, Report 2021.
The Competitive Edge Of Nykaa’s Business Offerings
From dominant market share to a high level of customer stickiness, Nykaa’s IPO documents
highlight some key insights that portray a strong competitive position. Some of these include:
Superior Market Share
Nykaa’s market share in the online beauty and personal care space is estimated to be more
than 18.5% (calculated as revenue of FY20/TAM). It is the single largest share held by a
new-age startup, while other competitors, including Purplle, Pureplay, MyGlamm,
Mamaearth and SUGAR, hold less than 2% of the total addressable market.
Strong Brand Value And Customer Loyalty
Nykaa commands significant brand value and customer loyalty across the BPC market. In
FY21, 70% of the total gross merchandise value (GMV) on the platform was generated by its
existing customers. The share of existing customers in total GMV jumped 15 percentage
points from 55% in FY19.
Sound Financial Performance
A sound financial performance in FY21, including positive EBITDA, free cash flow (FCF)
and a high ROCE, indicates that the company’s fundamentals were strong in the financial
year. In an ecosystem where only 1 out of 4 funded startups is EBITDA positive, showcasing
strong financial fundamentals before an IPO will drive bullish sentiments.

Key Concerns:

Nykaa’s Business Offerings

With the growing adoption of consumer internet businesses in India, the market is outshining
its traditional peers in terms of growth and return on investment. This has attracted the
attention of the regulators as well as large-cap companies. Conglomerates such
as Reliance Industries (RIL) and the Tata group pose a considerable threat (through their
super-apps) to the long-term profit margins of consumer internet businesses in India.
Growing Competition In The Market
India’s beauty and personal care market is growing at a CAGR of 50% (2015-2025), and the
total revenue potential of the market by 2025 is estimated to reach $30 Bn. Out of this, 18%
($5.4 Bn) is expected to come from the online segment.
However, the market competition for Nykaa will not be limited to other digital native rivals
such as SUGAR Cosmetics, Purplle or MyGlamm. Instead, ecommerce giants like Amazon
and Flipkart will also be in the fray as they consider the BPC space an emerging market for
online retail.
It should also be noted that India’s legacy conglomerates like Reliance and the Tata group
have already set the stage for the launch of their super-apps. Both these groups enjoy deep
pockets and well-established brand value. Hence, they pose a significant threat to all
independent consumer internet startups.
User Data Security
Today, the utility of technology is at its peak in India, and so is the risk of cyberattacks. A
report by the Indian Computer Emergency Response Team (CERT-In) says that the number of
cybersecurity incidents handled by the organisation has surged 23x, from 49.4K in 2015 to
1.2 Mn in 2020.
Consequently, data security and privacy are now a matter of utmost importance for Indian
internet users. A survey by McAfee has revealed that 78% of the surveyed Indian internet
users are concerned about their financial data being stolen (credit and debit card details, for
instance), thus indicating that a cybersecurity incident involving the same could result in a
serious churn rate and the number of active users could dip significantly.
Nykaa IPO:
IPO Size for Nykaa Fashion: ₹5,351.92 Crore
IPO Synopsis
The total issue size of Nykaa IPO is ₹5,351.92 Crore, with the lot size of 12 equity shares at
the IPO price range between ₹1,085-₹1,125.
Founded in 2012, e-commerce firm Nykaa has redefined the way Indians shop for beauty
products. The company was started by an ex-investment banker, Falguni Nayar, whose aim
was to deliver beauty products to women, even in the remote corners of India. With the right
investments in marketing and warehousing, their business grew. Today, Nykaa is a mostly
online lifestyle-focused technology platform targeting Indian men and women. It sells around
100 products per minute. Its products range from luxury gowns to health supplements.
The company has filed the DRHP for its IPO. Here are the key details.
Key highlights:
• Incorporated in 2012, FSN E-Commerce Ventures is an omnichannel beauty and
fashion retailer.
 • The company operates two online platform - Nykaa (Beauty and personal care) and
Nykaa Fashion (Apparel and accessories).
• As of March 31, 2021, its mobile applications had cumulative downloads of 43.7
million.
• The company also has an offline presence with 73 physical stores across 38 cities as
of March 2021.
• In FY21, the company’s total gross merchandise value (GMV) was ₹4,045 crore.

Entry norm adopted by the Company:

Based on the provided information about the Nykaa IPO, here's a breakdown of the entry
norms:
1.Investor Categories:
• Retail Individual Investors (RIIs):
This is likely the category you'd fall under if you're an individual investor.
Minimum investment: 1 lot (12 shares)
• Qualified Institutional Buyers (QIBs):
Institutional investors like banks, insurance companies, and mutual funds.
Allocation: 75% of the Net Offer (after allocating to Anchor Investors)
• Non-Institutional Investors (NIIs): High net-worth individuals and corporate bodies.
Allocation: Up to 15% of the Net Offer

2.Employees: A separate category with a reservation of 0.05% of the post-offer paid-up

equity share capital and a potential discount on the share price.
3.Bidding Process:
Book Building Process: The price was determined based on investor bids within a specified
price band.
Anchor Investors: They could bid a day before the public offering and received a guaranteed
allocation at a fixed price (₹1,125 per share in this case).
Application Supported by Blocked Amount (ASBA): Retail investors had to use this process
where the bid amount gets blocked in their bank account until the shares are allotted or the
bid is rejected.
4.Other Norms:
Offer Price: ₹1,125 per share
Minimum Investment: Investment had to be done in multiples of the lot size (12 shares).
PAN card was mandatory for all applicants.
Demat account details were required for allotment of shares.
KYC (Know Your Customer) compliance was essential.
Reservation:
50% of the shares offered to RIIs were reserved for them.
Within the RII category, a further 10% reservation was made for eligible employees.
Nykaa's IPO followed the Retail Individual Investor (RII) category guidelines laid out by the
Securities and Exchange Board of India (SEBI).

Note: The information provided is from the Nykaa IPO prospectus and reflects the norms
applicable in October-November 2021. Since IPOs are one-time events, these specific entry
norms wouldn't be applicable for new investors today

Offer details :
IPO size: ₹5,324 crore
Fresh issue: ₹630 crore
Offer for sale: ₹4,694 crore
Price band: ₹1,085-₹1,125 per share
Lot size: 12 shares
Cost per lot: ₹13,500
Issue opens: 28 Oct 2021
Issue closes: 1 Nov 2021
Basis of allotment date: 8 Nov 2021
Initiation of refunds: 9 Nov 2021
Credit of shares to demat account: 10 Nov 2021
Expected listing date: 11 Nov 2021
The offer for sale comprises shares of founders/promoters Falguni Nayar and Sanjay Nayar.
They along with their respective family trusts own around 54.3%, which is about 25.3 crore
shares.
Reasons for going public and objective of the IPO
The company is launching the IPO to raise funds.Nykaa plans to use the proceeds from the
IPO for
• Investment in FSN Brands and Nykaa Fashion for funding the set-up of new retail
stores – INR 350 million
• Capital expenditure to be incurred by the company and investment in Nykaa E-Retail,
Nykaa Fashion and FSN Brands for funding the set-up of new warehouses – INR 350
million
• Repayment or prepayment, in full or in part, of certain borrowings availed by the
company and Nykaa E-Retail – INR 1300 million
• Expenditure to enhance the visibility and awareness of its brands – INR2000 milliom
• General corporate purposes-25% of net proceeds
Issue Size:

The INR53.5bn IPO consists of fresh issue of INR6.3bn and OFS of INR47.2bn (from
promoters and other investors) which would result in promoter’s stake reducing from 54.2%
pre-IPO to 52.6% post-IPO. The funds raised will be utilized for setting up new retail
stores/warehouses, debt repayment and marketing.

Issue Opens- 28 October 2021

Issue Closes- 1 November 2021

Offer price and valuation:

We like Nykaa given its leadership position in online Beauty and Personal Care (BPC)
market, customer centric approach, profitable tech platform and capital efficient business
model. The issue is valued at 16.1x FY22 EV/Sales on a post issue and annualized basis,
which seems to be similar to other Indian unicorns. We believe Nykaa is rightly placed to tap
the high growth digital/online penetration in BPC/Fashion market. We recommend Subscribe.
Investors with high risk appetite can Subscribe for Listing Gains given fancy for unique and
first of its kind listing in the e-commerce space.
Financial Information about the Company given under “The Offer”:

• Revenue: The company's revenue has grown steadily over the past three years, from
₹11,114 crore in FY2019 to ₹24,409 crore in FY2021. This represents a growth of
59% in FY2020 and 38.1% in FY2021. There is also data for the first quarter of
FY2022, which shows revenue of ₹8,170 crore, which is 183% higher than the same
quarter in the previous year.

• Growth (%): This column shows the year-over-year growth rate of the company's
revenue. As mentioned earlier, the growth rate has been positive for the past three
years.
• Adj PAT: This stands for Adjusted Profit After Tax. The company has a negative Adj
PAT in FY2019 and FY2020, but it turns positive in FY2021. There is also data for
the first quarter of FY2022, which shows an Adj PAT of ₹34 crore.
• Growth (%): This column shows the year-over-year growth rate of the company's
Adj PAT. It is important to note that the growth rate for FY2020 and FY2021 is
labeled LTP, which likely stands for "Long-Term Plan" and suggests that the Adj PAT
was not positive in the previous year for comparison.
• EPS (INR): This stands for Earnings Per Share. The company has a negative EPS in
FY2019 and FY2020, but it turns positive in FY2021. There is also data for the first
quarter of FY2022, which shows an EPS of ₹0.1.
• RoE (%)*: This stands for Return on Equity. The company has a negative RoE in
FY2020, but it turns positive in FY2021. There is also data for the first quarter of
FY2022, which shows an RoE of 1.5%.
• EV/Sales (x)*: This stands for Enterprise Value to Sales. The company's EV/Sales
ratio has declined steadily over the past three years.
Shareholders of Nykaa:
Following is the list of the top shareholders of the company.

Strengths:
• Constant engagement with customers by offering classes on makeup, health and
beauty
• Extensive range of products, explosive choice to customer- houses thousands of
brands
• Both physical and online presence
• Own warehousing. Ensures availability of products and timely delivery
• Owned brands that offer diversification to customers
• Brand support from actors, experts and vloggers

Opportunities:
• The rise of the e-commerce sector in India presents an excellent opportunity for
Nykaa to rise and shine.
 • The evolution of Artificial Intelligence may help Nykaa to attract more customers.
manage their demands and fulfil all their requirements.
• The growing social media followers may lead to a growing customer base.

Threats:
• Competition in the form of e-commerce giants like Amazon and Flipkart
• Increasing competition in the beauty and skincare industry
• Cheaper and counterfeit goods available in the black market
• Amendments in consumer protection rules in India, which might have adverse effects
on operations and financials

Industry outlook:

From 2020 to 2025 Nykaa expects

The Indian beauty and personal care market to almost double in growth
The Indian fashion market to more than double in growth
A compound annual growth rate (CAGR) of 11% for the retail market
A CAGR of 17% for the retail market for non-essential goods
Financial performance:

Despite the pandemic, Nykaa’s total income rose 38% from FY20 to FY21
From a loss of ₹16.34 crore in the year 2020, Nykaa saw a profit of ₹61.94 crore in FY 2021
This was mainly due to the increase in revenue in operations from online shopping.
All in all, Nykaa is expected to benefit from the growing beauty, personal care and fashion
industry and the over-popularity of digital media.

Post IPO Analysis:

Since its IPO in October, Nykaa has experienced a decline in market capitalization from ₹1
lakh crore to ₹53,540.46 crore. Analysts attribute this decline to prevailing market sentiment,
including the meltdown in tech stocks, with some also suggesting that the stock may have
been overvalued. According to Screener.in, Nykaa was trading at a price-to-sales ratio of 12
and a price-to-earnings ratio of 1,212 at the time of analysis.
Despite these market challenges, Nykaa's Q2 FY23 results indicate continued growth
momentum. The company reported a notable 39 percent year-on-year increase in quarterly
revenue from operations, amounting to ₹1,230.8 crore. Additionally, its net profit for the
September quarter witnessed a substantial 344 percent year-on-year growth, reaching ₹5.2
crore.
These positive quarterly results suggest that Nykaa is still on a growth trajectory despite the
market conditions. The significant increase in revenue and net profit underscores the
company's resilience and ability to navigate challenges effectively.

One Year Since IPO:

Founded in 2012 by Falguni Nayar, Nykaa began as a retailer of beauty products, operating
initially from her father's office. Over time, the company expanded its offerings to include
Nykaa Fashion, Nykaa Man, and other verticals, including offline retail channels. In
November 2021, Nykaa made waves with its ₹5,352-crore IPO through Nayar's FSN E-
Commerce Ventures Ltd, which was oversubscribed nearly 82.5 times. On the same day,
Nykaa's market capitalization soared to ₹1 lakh crore, propelling Nayar to rank 44 with a net
worth of $4.08 billion on the 2022 Forbes India Rich List.

Reflecting on the IPO, Adwaita Nayar, Falguni's daughter and CEO of Nykaa Fashion,
described it as a pivotal moment for the company, marking a significant step in its journey.
However, she emphasized that Nykaa views the IPO as just one milestone, believing that
there is still much more to achieve and that the company's trajectory is akin to being on Day
1, signifying the ongoing journey of growth and development.

In its Q2 FY23 financial reports, Nykaa announced positive improvements across key
metrics. The company's EBITDA rose to ₹61.1 crore, up from ₹28.8 crore in the previous
year's period. Additionally, gross margins increased to 45.3 percent compared to 42.7 percent
in Q2 FY22, while EBITDA margin improved to 5 percent from 3.3 percent in the same
period last year. These improvements demonstrate Nykaa's continued focus on enhancing
operational efficiency and profitability.

In the period leading up to the announcement of quarterly results, there was a significant
decline in the share prices of FSN E-Commerce Ventures, Nykaa's parent company, with
prices falling by over 20 percent within a fortnight. This decline resulted in Falguni Nayar
experiencing a loss of $1 billion in just 15 days. According to Karan Taurani, senior vice
president at Elara Capital, several factors contributed to this decline. Apart from the global
meltdown in tech stocks, Taurani attributes the drop to the expiration of the mandatory one-
year lock-in period for pre-IPO investors on November 10. Additionally, investor panic
selling may have been triggered by expectations surrounding the imminent announcement of
quarterly results. Moreover, heightened competition from players such as Ajio and Myntra,
which were entering the beauty and personal care (BPC) space, may have raised doubts
among investors regarding Nykaa's growth prospects.
However, despite these challenges, Nykaa showcased a stellar performance in the subsequent
quarter. This prompts the question of whether investors can regain their trust in the company.
Taurani expresses confidence in Nykaa's future, citing its phenomenal profit growth. He
believes that even after the lock-in period, there is unlikely to be a significant drop in share
prices, given the substantial promoter holding. Moreover, only 35 percent of the company's
shares are expected to go through a lock-in expiry, further mitigating potential downward
pressure on the stock.
In comparison to many tech stocks that listed around the same time, Nykaa has demonstrated
resilience. Abneesh Roy, head of the research committee at Nuvama Research, praises Nykaa
as one of the few profitable new-age companies. He highlights Nykaa's sustainable
competitive advantage, driven by pillars of Authenticity, Assortment, and Engagement
(AAE). Roy emphasizes Nykaa's transformation into a comprehensive lifestyle platform,
underscoring its unique positioning in the market.

Nykaa’s Track from 2015 to 2019 :

In 2015, Nykaa embarked on the journey of creating its own beauty brand, initially
identifying market gaps in price points and introducing products like nail enamels and bath
and body items. With the aim of strengthening its private label offerings, Nykaa enlisted
Reena Chhabra, the former COO at Colorbar, to lead its beauty division.

Since its IPO, Nykaa has diversified its portfolio across various verticals, including Nykaa
Beauty (comprising ecommerce, physical retail stores, and private labels), Nykaa Fashion,
the eB2B platform SuperStore by Nykaa, and Nykaa Man. In a strategic move to expand its
reach, Nykaa formed an alliance with the Middle East-based Apparel Group in October to
venture into the Gulf countries, establishing multi-brand omnichannel beauty retail
operations.
The company has witnessed significant growth within its beauty and fashion segments, with
the number of in-house brands rising to 10 and 11, respectively. Nykaa's growth has been
further propelled by strategic acquisitions of brands such as Dot & Key, Earth Rhythm, Kica,
LBB, and Nudge Wellness. Given the fierce competition in the beauty and fashion sectors,
Nykaa has strategically diversified its investments to mitigate risks.
Anchit Nayar, CEO of Nykaa E-Retail, emphasizes the company's understanding of the
Indian consumer's preferences, enabling them to identify promising brands and scale them
effectively. Nykaa's private labels serve as a means to address market gaps and differentiate
itself from competitors like Ajio and Tata Cliq, who are also venturing into the beauty and
personal care segment. Nykaa's exclusivity deals with renowned international brands like The
Ordinary, Anomaly, Huda Beauty, and Charlotte Tilbury further bolster its market position.

In collaboration with Bollywood actor Katrina Kaif, Nykaa introduced Kay Beauty in 2019,
which has rapidly gained traction, achieving an annualized GMV run rate of over ₹100 crore
within three years. This transformation towards personal care has been instrumental in
increasing customer frequency and improving conversion rates. Despite a slight drop in
average order value by 5 percent to ₹1,864 in FY22, Nykaa has witnessed a substantial
increase in monthly average unique visitors from 13.5 million in FY21 to 20.8 million in
FY22 and number of orders increased from 17.1 million in FY21 to 27 million in FY22 for
beauty and personal care.

Current Scenario:

After experiencing a significant decline of almost 56% in 2022, FSN E-Commerce Ventures,
the parent company of Nykaa, has shown signs of a modest recovery, rising over 18% in the
year-to-date (YTD) of 2023. The turnaround commenced in May, breaking an almost 11-
month hiatus, and was followed by substantial monthly gains of 18.83% in June. However,
between May 2022 and April 2023, the stock saw positive returns in just one month, February
2023, recording a modest 2.3% increase.
Despite this improvement, the stock is still below its record high of ₹428.96, reached around
the time of its listing in November 2021. Over the past year, it has gained 5.2%, hitting its 52-
week high of ₹183.40 on December 18, 2023.
Regarding the outlook for 2024, Nykaa's stock has garnered mixed sentiment from different
brokerage houses. Nuvama expresses a bullish outlook, maintaining a target price of ₹187,
suggesting a potential upside of 9%. However, the brokerage notes concerns about rising
competition and increasing debt, which could affect longer-term visibility and hinder recent
re-rating compared to other platform peers.
JM Financial is also optimistic, offering a 'buy' rating with a target price of ₹210, indicating a
substantial upside of 23%. The brokerage is confident in Nykaa's Fashion segment's earlier-
than-expected profitability.
Conversely, ICICI Securities projects a target price of ₹185, implying an 8% upside. While
acknowledging the stock's de-rating over the past year due to concerns about the fashion
segment, ICICI Securities anticipates a re-rating in the near term, especially with the support
of a robust festive season in the December quarter.
However, JPMorgan and Macquarie adopt a bearish stance, maintaining 'underweight' and
'underperform' ratings, respectively. JPMorgan sets a target of ₹125, suggesting a potential
downside of 27%.
These varied assessments underscore the complexity of market perceptions surrounding
Nykaa, with some foreseeing positive trends and others expressing caution, particularly
regarding competitive pressures and debt levels. Investors should carefully consider these
perspectives alongside their own research before making investment decisions.
From a technical perspective, BP Equities reiterates a 'buy' recommendation on Nykaa with a
target of ₹210, indicating a potential upside of 22.5% and a stop loss at ₹166. The brokerage's
pattern analysis suggests a strong breakout and cues of buyers holding strength, supported by
improving relative performance compared to Nifty and favorable indicators such as RSI
levels.
Regarding earnings, Nykaa's parent company, FSN E-Commerce Ventures, reported its
slowest quarterly revenue growth since its stock market debut, attributed to intense
competition in its key Beauty and Personal Care (BPC) segment. Despite this, the company
managed to achieve a 50% year-on-year increase in net profit for Q2, reaching ₹7.8 crore,
indicating effective cost management or other strategic measures to enhance profitability
amidst challenging market conditions. Additionally, consolidated revenue from operations
grew 22% year-on-year to ₹1,507 crore in Q2 FY24.

Subscription Status: Oversubscribed by 81.78 times, with strong retail investor participation
(12.24 times).
 • Cut-off Price: Not applicable, as there was a price band of ₹1,085 to ₹1,125 per
share.
• Allotment: Breakdown of shares allotted to different investor categories (QIB, NII,
RII, Employees).

• Listing Price: ₹1,125 on both BSE and NSE.

Nykaa Post-Listing Performance

The information you provided highlights Nykaa's successful listing with a significant increase
in share price from the IPO price. Here are some key points:
• Strong Initial Performance: Share price rose by 89% on the first day of listing.
• Market Capitalization: Reached nearly ₹1 lakh crore after listing.
• Financial Performance:
o Growing GMV (Gross Merchandise Value).
o Increasing Revenue and Profit.
o Expansion into Fashion segment.
o Strong brand recognition and customer base.
Buy/Hold/Sell Decision
The text offers a balanced view of factors to consider before making a decision:
Reasons to Buy:
• High growth potential in the Indian beauty and personal care market.
• Recent positive financial performance.
• Strong brand recognition and loyal customer base.
Reasons to Hold:
• Recent stock price correction.
• Uncertainty around profitability of the fashion segment.
• Potential impact of economic conditions on discretionary spending.
Reasons to Sell:
• High valuation compared to historical data.
• Competition in the e-commerce beauty market.
• Recent decline in profit margins.

Current Share Price:

Nykaa has proven its durability and adaptability in the highly competitive Indian e-commerce
market through its path from its founding in 2012 to its initial public offering (IPO) and
subsequent performance. Nykaa has become a market leader in the beauty, personal care, and
fashion categories in spite of obstacles including fierce competition, shifting regulations, and
cybersecurity worries. The company's success has been attributed to its omnichannel
presence, broad product variety, great brand recognition, and emphasis on customer
engagement.
With the proceeds from the IPO going toward debt repayment, marketing, and expansion,
Nykaa achieved a major milestone. Even though there was some market volatility after the
initial public offering (IPO), the stock's potential for long-term success is indicated by its
steady development in sales and profitability. Regarding Nykaa's prospects going forward,
analysts have voiced differing views. Some have emphasized the company's distinctive
positioning and growth chances, while others have cautioned about pressure from competitors
and high debt levels.
Overall, Nykaa is well-positioned for continued growth and success in the years to come
because to its ability to overcome obstacles and seize chances in India's burgeoning e-
commerce sector.