Nykaa plans IPO at $3 billion valuation

Cosmetics e-tailer Nykaa is looking at a stock exchange listing by the end of this year or early 2022 at a valuation of over $3 billion, a person aware of its plans said, joining e-commerce leaders such as Flipkart, Zomato and Pepperfry preparing for the public markets.

The initial public offering (IPO) by Nykaa, which was founded eight years ago, will be the first by an online beauty marketplace in India.

The Mumbai-based firm last raised an undisclosed amountfrom Boston-based asset management firm Fidelity Investments Inc. in November through a secondary transaction in India, providing a partial exit to early investors and employees. The deal valued the company at a little over $1.8 billion, the person cited above said on condition of anonymity.

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Nykaa founder Falguni Nayar had said in 2018 that the company would look for an IPO by 2020 or so. However, the pandemic might have slightly altered those plans.

Bloomberg News first reported the development on Tuesday evening.

“Nykaa will most likely look at achieving overall profitability this year before going public. Considering the boost in business after the lockdown and consumer shift towards digital, the company might look at a listing of much more than $3 billion in valuation,” the person cited above added.

Nykaa declined to comment.

The company crossed a billion dollars in valuation in March 2019 when it raised ₹166 crore in a primary transaction from Steadview Capital at a valuation of $1.2 billion.

After the Fidelity transaction in November, Nykaa had said it clocked a revenue of ₹1,860 crore for the year to March, and was expecting a 40% growth in consolidated revenue this fiscal.

The company’s other investors include Lighthouse Advisors and TPG Capital.

“Beauty platforms such as Nykaa have enough headroom to expand in the beauty and personal care market, especially given the gap in supply and latent demand in the premium and mass segment. They have solved the supply gap though an omni-channel play coupled with a deep and wide product portfolio and consistently high availability. Moreover, positive unit economics makes them well-positioned for public markets,” said Rishav Jain, senior director and lead –consumer, retail and internet at consulting firm Alvarez and Marsal.

Jain added that the pandemic has provided tailwinds to e-commerce by increasing customer adoption of online platforms, thereby enhancing the investment view on technology-based businesses.

Nykaa will join the likes of e-commerce major Flipkart, food delivery firm Zomato, furniture e-tailer Pepperfry and online grocery platform Grofers, besides others which are also planning to go public soon.

Nykaa’s Nayar said in an interview last year that the company is focusing aggressively on its fashion category, which was launched in 2018.

“Fashion may be nearly 20% of our GMV (gross merchandise volume) in the near term. And we are working towards building it to almost 40% of our business in the next 3-5 years...our fashion category is already trending 160% of February (or business as usual) levels,” she had said.

NykaaMan, its personal care offering for men, will contribute 5-8% of the startup’s overall business this fiscal year, while for its beauty category, private labels will be less than 20% of consolidated sales, Nayar said.