FSN E-Commerce Ventures, the parent entity of beauty startup Nykaa, saw its market value nearly double to over Rs 1 trillion ($13 billion) during its stock market debut on Wednesday. Shares of the company rose 96 per cent over its IPO price of Rs 1,125 to close at Rs 2,207. Nykaa is India’s first woman-led unicorn founded by Falguni Nayar, a former investment banker. The strong debut has made Nayar—owns 54 per cent stake in the company—India’s richest self-made female billionaire.
“A good market reception is very encouraging,” Nayar, CEO of Nykaa said, adding that her entrepreneurial journey to build Nykaa started at the age of 50. “Hope this inspires other woman entrepreneurs to be the ‘Nykaa’ (heroine in Sanskrit) in their own life.”
Nykaa has joined food delivery firm Zomato, which listed in July, in the exclusive Rs 1-trillion-plus market cap listed startup club. Paytm, whose Rs 18,300-crore IPO closed on Wednesday, would soon join the club.
Experts said the backing India’s internet startups are getting from the public demonstrates the maturity and depth of the domestic capital markets and is an encouraging sign for the large startup ecosystem.
Nykaa’s Rs 5,300-crore IPO had 82 times subscription, most among large startup IPOs.
Analysts said investors are looking at Nykaa as a play on expected growth in online beauty and personal care (BPC). Currently, India’s online BPC market is highly underpenetrated at just 8 per cent, despite growing at 60 per cent per annum in the past five years, they said.
“Nykaa is the first of its kind listing in the e-commerce space and thus garnered a lot of interest, validated from IPO subscription of 82x. Apart from leadership in online BPC in India, Nykaa is also one of the fastest growing fashion platforms in India based on GMV (Gross Merchandise Value). Nykaa’s key strengths lies in its inventory-led business model for the BPC segment, which allows it to offer authentication for all its products and ensures availability and efficient distribution,” said Sneha Poddar, AVP Retail Research, Motilal Oswal Financial Services.
Experts said investors are also drawn to Nykaa’s unique traits that are rare among startups. For one, the company is profitable and has a large promoter shareholding.
“At 54 per cent, Nykaa’s promoter shareholding is among the highest in the startup ecosystem. This means that the promoter’s fortunes are closely tied to the company. Besides, the company’s shareholding is dominated by domestic investors, which also breaks the stereotype that you need large foreign investor backing to be successful,” said an investment banker requesting anonymity.
Nykaa had reported net profit of Rs 62 crore for the financial year 2020-21 (FY21) on revenues of Rs 2,440 crore and gross merchandising value (GMV) of $540 million.
Through its IPO, Nykaa has raised Rs 630 crore, which will be used to increase its brand awareness, setting up of new retail shares and warehouses and to repay its debt.