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Nykaa plans to go public later this fiscal at a valuation of $4.5 billion, a sharp rise from its earlier valuation of more than $3 billion, as the beauty retailing startup gains from a marked shift towards online sales during the pandemic.

Nykaa, founded by former investment banker Falguni Nayar, will keep unchanged the size of the public offering at between $500 million and $700 million, said two people directly aware of the internal discussions. Both declined to be named as the talks are private.

They said the rise in Nykaa’s overall valuation is led by a spurt in revenue and profit for the e-commerce platform, primarily due to covid-related disruptions, which has pushed more consumers to purchase online.

Mint reported in January, citing a person aware of the plans, that Nykaa was looking at going public by end-December or early 2022 at a valuation of more than $3 billion.

“The road shows are on for the IPO (initial public offer), and FSN Ecommerce Ventures Pvt. Ltd, the holding company of Nykaa, will file its draft red herring prospectus by this June-end or early July, and the IPO should take off in the March quarter of this fiscal," one of the two people cited above said. “The public offer will be coupled with an offer for sale to provide an exit to existing investors. The price band is yet to be decided, but a 10-20% stake of the company could be offered to the public for an adequate free-float".

A Nykaa spokesperson declined to comment.

Nykaa, which was founded in 2012, is India’s top women-centric online marketplace with around 15 million registered users and caters to 1.5 million orders a month. The platform has been able to carve out a niche for itself through excessive focus on the beauty and personal care segment, which differentiates it from horizontal e-commerce companies like Flipkart and Amazon.

Nykaa has appointed Kotak Mahindra Capital Co. and Morgan Stanley as managers for its initial public offering (IPO).

While several large startups in the unicorn league, or those with a valuation of more than $1 billion, such as Paytm, Flipkart, Zomato, Policybazaar, Grofers, and Pepperfry, are also looking for public listings, Nykaa is the only startup that is profitable and will meet the criteria to list on the main board of Indian stock exchanges.

“Globally, fashion and lifestyle businesses have remained unscathed by the pandemic. Nykaa, like similar players outside India, has demonstrated phenomenal growth. It will have a first-mover’s advantage when it lists. The company has an immense potential to scale up and after this IPO, possibly, Nykaa’s contenders such as Colorbar too would look for public listing," Sudip Bandopadhyay, group chairman of Inditrade Capital, a reasearch, broking and investment advisory firm?.

Nykaa has posted annual profits since FY19. It was one of 11 startups to become a unicorn last year, after raising $25 million in March 2020 from Steadview Capital.

According to the Securities and Exchange Board of India’s listing norms, a firm is allowed to list its shares on the main board of stock exchanges only if it has a track record of profits for three preceding years.

Nykaa posted its first annual net profit in fiscal 2019 when it posted a revenue of 1,160.98 crore and expenses of 1,157 crore. In fiscal 2020, revenues surged 60% to 1,860 crore, and the company maintained its profit at the same level. Nykaa reported a net profit of 2.31 crore in FY19. For FY20 it posted a profit before tax of 94 crore.

“In FY21, Nykaa’s profit has increased, which means it has reached a level where it can sustain its profits. Revenue is expected to double this year with online shopping activities gaining pace," the second person cited above said.

Nykaa expanded its presence to offline retail in 2015 and currently has a network of 80 stores, housing luxury brands such as Tom Ford, Jo Malone London, Dior and Givenchy.

In 2019, Nykaa acquired fashion brand Twenty Dresses to expand its footprint in the apparel space, and recently, it acquired contemporary fashion jewellery brand Pipa Bella.

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