India’s first female-led unicorn gears up for IPO | Fashion Industry News | World Weekly
For years, Falguni Nayar has been guiding founders of Indian companies through roadshows in Europe and the US as they make their way to their debut in the stock market. And now, the former investment banker is guiding her startup into a historic initial public offering.
Nykaa, her brainchild, has grown into India’s best e-commerce site for beauty products, with endorsements from Bollywood stars and enthusiastic followers in their twenties. The startup, officially known as FSN E-Commerce Ventures Ltd. , preliminary documents late Monday for an initial public offering, which Bloomberg News reported could value the business at more than $4 billion.
One of the insights Nayyar picked up from her time working with entrepreneurs was the importance of a motivating job assignment. With Nykaa, she saw the opportunity to help women in India take care of themselves, and break away from the country’s traditional respect for men.
“I was inspired by these hard-core founders,” Nayar said in a recent interview via Zoom from her home in Alibaug. “Our message to women has been to shine the spotlight in her life on herself. You are important to your story and you shouldn’t feel guilty for being center stage.”
The message had an echo. Founded in 2012, the Mumbai-based startup now offers over 2,500 brands of everything from mascara and makeup remover to Indian velvet kohl and body art called mehndi. With its 70-plus websites, apps and stores, the company generated 24.5 billion rupees ($330 million) in revenue and other income in the fiscal year ending in March, according to its filing. That number has risen by more than 35% over that period, despite store closures due to the pandemic and delivery challenges. The startup is profitable.
If the IPO goes ahead as planned, Nykaa will be the first female-led unicorn in India to go public. Nayar owns about half of the company with her husband and twin sons, which means their stake could be worth over $2 billion if the startup reaches or exceeds initial expectations.
“It was a niche waiting to be tapped and Falguni had it covered,” said Arvind Singhal, Chairman of Technopak Advisors Pvt, a leading advisory firm. “India’s young population has increasing aspirations and women across social classes are more empowered with each passing generation.”
Nayar founded the company nine years ago, and figured out if she would start a business before she turned 50. “The point of no return,” she said.
The name she chose is derived from the ancient Sanskrit word for heroine.
Nayar saw that in the West, entire floors of high-end stores were devoted to cosmetics and other beauty products. But millions of Indian women still have to visit ‘bangle’ or ‘miscellaneous’ shops in squalid neighborhoods for their beauty needs. These mom-and-pop stores, which are mostly run by male owners, stock cosmetics and fashion jewelry along with craft kits and other knick-knacks. Choices were limited, displays are poor, and there was no opportunity to sample products.
Nayar’s goal was to create a great, one-stop shopping experience where consumers could shop online or in physical stores, depending on what they were looking for on that particular visit. They can visit one of the colorful specialized Nykaa outlets to try out lipstick or eye shadow for example. Online, they can get tutorials, including from celebrities like Janhvi Kapoor or Debasree Banerjee.
Unlike other e-commerce startups, Nykaa has resisted price cuts to attract buyers.
“We didn’t want to be a discount store,” Nayar said. “We’d rather sell the right color of lipstick at full price, rather than the wrong shade at half price that will make the buyer unhappy within minutes of wearing it.”
From 60 orders per day at launch, sales soared to over 1,000 orders within months. Nykaa has built on its momentum by customizing products for Indian skin tone, skin types and local weather. Launched a range of nail colors, now reaching 2,700 colors. It has also encouraged shoppers for makeup essentials, such as foundation, and is now offering 1,500 shades. The special Nykaa lipstick collection contains fun Indian names like Maharani (the wife of the Maharaja) and Mishti (a nice person).
“They really have everything,” said Sakshi Jin, a 21-year-old who just graduated from college. “I can compare prices, read extensive reviews and then buy. All my friends shop at Nykaa too.”
A college student in Bangalore Sayeree Nandi started browsing products on Nykaa at the beginning of the pandemic and has become addicted to the app ever since.
It’s more convenient than going to multiple physical stores or searching on Amazon,” said the 21-year-old. Read reviews before buying – skin care products are their weakness.
The competition is on the rise. Giants like Amazon.com Inc. and Flipkart Online Services Pvt which is controlled by Walmart. It’s expanding into the $15 billion cosmetics market, along with specialty retailers like LVMH’s Sephora. Local competitor Purplle secured support from Goldman Sachs Group Inc.
Nykaa’s strategy has been to build on its leadership by investing in technology, marketing and product extensions. Its online services use algorithms to recommend products based on what customers have purchased before, much like Netflix Inc. By movies.
It is used in volume to sever exclusive ties with foreign brands. International brands like Estee Lauder Cos. and MAC Cosmetics Inc. In highlighting their products in India with the growth of the market. They’ve customized products, too—Estee Lauder offers small 7- to 20-milligram bestsellers for the budget-conscious.
Nykaa has expanded into three separate apps, including, most recently, an app for men’s products.
“At social and business gatherings, very successful men would ask me about skin and hair care, so I decided to launch Nykaa Man so that men could shop without fear,” Nayar said.
Anchet, her son who graduated from Columbia University, runs the beauty e-commerce business, while her daughter Adwaita, who has an MBA from Harvard Business School, runs the fashion sector. Her husband, Sanjay Nayar, is the India President of KKR & Co.
Ravi Mehta, managing director of London-based Steadview Capital and senior investor in Nykaa, said he believes Nayar has a particularly strong business model among Indian internet companies.
“It is one of the fastest growing companies in terms of revenue of more than 15 startups that are ready to go public,” Mehta said in a phone conversation. India-focused tech fund Steadview has invested in local startups, including Zomato Ltd. and Policybazaar and Lenskart Solutions Pvt.
India is still a small market in the beauty world and its relatively low standard of living means that those who can indulge in Nykaa products are a small segment of the country’s 1.3 billion population. But the number is growing with the economy – and the societal changes that empower more women. Technopack estimates that the cosmetic market will grow at more than 8% annually until 2025.
India has come a long way since most women were shopping for only two beauty products – lipstick and kajal eyeliner. Nykaa is now working on convincing them that they can indulge and upgrade to hair masks and overnight face serums, too.
“We still have ways to go,” Nayar said.