Nykaa is an Indian eCommerce company that sells wellness, beauty, and fashion products. Also, it sells products made in India and overseas. But why the name, Nykaa? How many of you know the meaning behind “Nykaa?” Nykaa comes from “Nayaka,” in Sanskrit, which means “the one in the spotlight.”
They have been in the limelight for the last few years and have a great future in the e-commerce and cosmetics industry. In 2020, Nykaa was priced at Rs.85 billion, which made it the first-ever unicorn startup led by an Indian woman.
In addition to its primary eCommerce business, it had established an offline presence through 76 brick-and-mortar stores across India. It has three offline store formats, including Nykaa On trend, Nykaa Luxe, and Nykaa beauty kiosks.
Falguni Nayar, previously working as a Managing Director at Kotak Mahindra Capital Company, founded Nykaa in 2012. It began as an eCommerce portal that sells a wide range of beauty and wellness products.
The founder, Falguni Nayar, graduated and then completed her MBA from IIM Ahmedabad, after which she joined A F Ferguson & Co as a manager. There, she worked for eight years. Later she joined Kotak Mahindra Capital Company, a famous investment Bank in India. After that, Nayar led Kotak Securities and later became the Managing Director of Kotak Investment Banking in 2007. She worked with the bank for 18 years, after which she resigned to start her company, Nykaa.com.
When Nykaa made its debut, the beauty industry in India was shattered. Then, brick-and-mortar shops had a few collections, and men’s beauty products did not have as many varieties as we have today.
Nykaa is one of the few companies which follow an inventory-based eCommerce model. Initially, the cost to attain a customer was Rs.1000/, which has now decreased from Rs.200 to Rs.300. Nykaa has built its offline presence in nearly 35 stores. The target audience of Nykaa is the 22-35 age group.
To date, Nykaa has acquired five companies. The brand last acquired Nudge Wellness, a New Delhi-based company, on April 22, 2022. It attained Kica on the same date and chose 18.5% stakes in the beauty brand Earth Rhythm for around $5.45 million. Previously, it acquired Dot & Key, a Kolkata-based skincare brand, on October 22, 2021.
Nykaa is in the late stage of attaining Little Black Book, according to reports dated June 20, 2022. However, companies have discussed the acquisition for a few months and recently provided a term sheet to LBB. On August 6, 2022, Nykaa received its board’s approval for the purchase in an all-money deal to be finalized within 60 days.
Nykaa is a prominent eCommerce company specializing in selling cosmetics, fashion, and beauty items, which is already listed at a price higher than some of the oldest and largest Indian businesses like Bharat Petroleum, Coal India, Godrej, and SBI Card. Nykaa became one of the leading eCommerce and retail beauty companies within four years.
Nykaa has over 17 million active monthly users and processes over 1.5 million orders. Here are some of the highlights of Nykaa that shows the brand’s growth:
Nykaa’s total GMV increased 47% YoY to INR 2,155.8 in the 1st quarter of 2022-23.
The personal and beauty care industry contributed almost 69% to Nykaa’s total GMV in Quarter 1.
In Q1 FY23, Nykaa opened eight new physical stores, taking the total number of stores to 113 in 52 cities.
Nykaa’s consolidated total profit increased 42% year-on-year (YoY) to INR 5 crores in Q1 FY23. However, the payoff was reduced by 33% every quarter from the previous March. Money from operations continued its upward curve, rising 41% YoY to INR 1,148.4 crores in Q1 FY23.
Unfortunately, Nykaa had gone through a difficult stage during the COVID-19 lockdown. During this time, the company experienced a fall of up to 70% in its sales in April 2020. However, the company reacted quickly, listed all the essential items efficiently to keep them in stock, and eliminated all non-deliverable products. Instantly, the company started growing its physical stores by taking the facility of its hyperlocal delivery.
Very soon, Nykaa recovered from the side effects of the COVID-19 Pandemic. Over 90% of what it was during the pandemic outbreak in 2020. The brands that deal with unicorn fashion, cosmetics, and beauty items have experienced a major move of the clients towards the significant categories, including hair care and personal skin care items, which helped it improve its business faster than its competitors after the Coronavirus Pandemic. Issuance of Bonus Shares
Nykaa’s move to time the record date for bonus shares with the release of lock-in shares comes across as part of a two-pronged strategy to deter a fire sale that would lead to a big drawdown in the stock price. While the move has indeed achieved the objective of avoiding a fire sale on the day of the release of lock-in shares, whether it will completely avert a fall triggered by lock-in share sales going ahead is still in question.
The move seems brilliant and an ingenious way to arrest a stock price fall, but it comes at a significant cost to existing shareholders of Nykaa and a certain section of pre-IPO shareholders.
Nykaa issued a bonus share of 5:1. Which means, for each share – an investor would get additional 5 shares. The fundamental idea behind bonus shares is that the number of shares issued increases as a constant proportion of shares held to shares outstanding. Regarding whether or not this is a wise decision by the management, there are arguments on both sides at the moment.
The argument in favour is that if there is no barrier for investors to depart, there would be a crash sell, which would lower the prices. This harms investor confidence and gives the impression that stock performance is subpar.
This is the argument against. Although the action is meant to lessen the hit in terms of stock price performance, it burdens a substantial portion of shareholders in a different way.
Further, the brand’s shift from an online to an omnichannel shopping model also helped it improve its business. All these changed the customer’s opinions about the brand and helped the brand attract audiences they could not see earlier.
On July 6, 2022, Nykaa announced its entry into the men’s innerwear category by naming GLOOT, a Nykaa brand for men’s innerwear and clothes belonging to the athleisure category. As soon as they announced their plan to enter the men’s innerwear and athleisure category, the Nykaa shares started rising.
