Veteran investment banker-turned-entrepreneur Falguni Nayar, whose beauty retailer Nykaa is poised to launch its IPO, has become India’s newest billionaire. A pre-IPO private placement in June valued Nykaa at $2.3 billion, putting Nayar in the three comma club with an estimated net worth of $1.1 billion.
The listing, which could value the nine-year-old company at an estimated $4.5 billion or more, would be a huge windfall for Nayar, propelling the worth of her initial $2 million investment even further.
As per the draft red herring prospectus, which was filed with the stock market regulator this week, the company is seeking to raise $71 million through a fresh issue of shares and is also proposing to sell 43.11 million shares by existing shareholders (including Nayar). The IPO will result in a massive payoff for Nykaa’s early investors, such as consumer goods billionaire Harsh Mariwala and Hong Kong-based commodities billionaire Harindarpal Singh Banga.
Nayar, 58, the founder, managing director and CEO of the Mumbai-based online seller of cosmetics and apparel, owns 54% of the company, along with her husband Sanjay Nayar, India CEO of U.S. private equity giant KKR, and their two children. The IPO is well-timed as Nykaa has recently turned profitable, making it an attractive proposition for investors.
Amid pandemic-induced lockdowns, consumers stuck at home went on an online shopping binge, ordering everything from lipsticks and mascaras to skin care creams. That shopping surge boosted Nykaa’s annual revenue to $334 million for the fiscal year ended March 2021, up from $236 million in the previous fiscal year. The company reported net profit of $8 million in that same period versus a net loss of $2 million in fiscal 2020.
Nayar is looking to deploy the IPO proceeds into brick and mortar—new warehouses and stores—as well as for enhancing Nykaa’s brand visibility. Nykaa, derived from the Sanskrit word “Nayaka” meaning someone in the spotlight, created a niche for itself by selling luxury beauty brands like Estee Lauder, Clinique and Bobbi Brown via its endless online aisles.
Nayar is now looking to deepen Nykaa’s presence on the ground as more aspiring Indians latch on to beauty products. According to estimates by Bangalore-based RedSeer Management Consulting, the Indian beauty and personal care market is expected to hit $28 billion in 2025, up from $16 billion in 2020. The fashion market is expected to touch $124 billion—up from $54 billion in 2020.
Today, Nykaa has 73 stores across 38 cities in India and distributes 1,350 brands. It also has its own private label range with everything from fragrances to fashion apparel, but the bulk of sales come from its website and apps.
Nearly 87% of Nykaa’s gross merchandise value in fiscal 2021 was generated by its mobile apps. And online shoppers spent nearly 100 million hours on its personal care and fashion websites like Nykaa TV on youtube.com; Nykaa Network and Nykaa Beauty Book.
Nayar’s entrepreneurial journey started in 2012 after she’d spent more than 20 years at Kotak Mahindra Bank helping entrepreneurs pursue their IPO dreams. That eventually stoked her ambition to start her own business. After studying the market, she realized that a reliable retailer of branded cosmetics, such as Sephora, did not exist in India.
Nayar had become a loyal Sephora customer on her frequent visits to the U.S., where her twins were studying between 2004 and 2008. (Both work with her now.) She figured that while drugstore chains like CVS Pharmacy also sold beauty products, Sephora had the edge because salespeople at its stores were so helpful and customer-friendly. Nayar decided that an Indian-version of Sephora was a timely idea. “This had a lot of potential but I knew I’d have to create the market,” Nayar said in an interview to Forbes Asia in 2019.
Based on her investment banking experience, she quickly sized up the market potential but “I didn’t know beauty or tech or retail,” she said at that time. Nayar overcame that by becoming an avid buyer of cosmetics herself and consulting with tech experts, then took the plunge. She started Nykaa as an online retailer, adding high street stores once it had established its name.
Startups like Nykaa have caught investors’ fancy lately and a slew of IPOs are set to hit the stock market. Food delivery firm Zomato, which has yet to become profitable, made a thundering debut in July, listing at a valuation of $12.2 billion. Profit-making Nykaa seems to be well-groomed by Nayar for reaping IPO riches.