Nykaa, established in April 2012 by Falguni Nayar, is an Indian e-commerce tykoon that has become a prominent player in the beauty, wellness, and fashion industries. Over the past years, it has evolved from a beauty platform to a comprehensive omnichannel marketplace, boasting over 2,000 brands and 200,000 products on single platform. This case study explores Nykaa‘s journey, operational strategies, financial performance, and the impact it has had on the Indian e-commerce sector.
Falguni Nayar, a former managing director (MD) at Kotak Mahindra Capital Company, identified an ignored market for beauty and wellness products in India. In 2012, she launched Nykaa as an e-commerce portal focusing on curating a range of beauty and wellness products. The brand’s name, originated from the Sanskrit word ‘nayaka,’ meaning “actress” or “one in the spotlight,” reflects its goal to empower individuals through self-expression.
In 2015, Nykaa transitioned from an online (only) model to an omnichannel approach, diversifying its product range to include fashion. This significant move allowed the company to lay a physical presence with over 100 stores across India by 2020. Nykaa Luxe, Nykaa On Trend, and Nykaa Beauty Kiosks are different store formats catering to diverse consumer preferences in India.
Financial Overview:
Revenue Growth:
Nykaa’s financial performance shows a trajectory of constant growth. In FY23, the company reported a significant growth in operating revenue, reaching ₹5,144 crore (US$640 million). This represented a remarkable jump from ₹2,441 crore in FY21 and ₹3,744 crore in FY22. The robust revenue growth indicates Nykaa’s triumph in expanding its customer base, diversifying its product offerings, and capitalizing on the increasing demand in the beauty and fashion landscape.
Profit and Loss:
Nykaa reported a profit of ₹61.6 crore in FY21, the following years witnessed a decrease in net income. In FY22, the profit came down to ₹41.3 crore, and further to ₹21 crore in FY23. The down trend in net income can be attributed to increased expenses, strategic investments, and possibly the impact of the COVID-19 pandemic. Inspite of the decrease in profits, Nykaa’s overall financial health remains strong.
Cash Flow:
The cash flow from operations provides glimses into Nykaa’s liquidity and ability to achieve its financial obligations. In FY21, Nykaa recorded a surplus of ₹133 crore, indicating healthy cash generation. However, in FY22, the company experienced a deficit of ₹354 crore, indicating increased capital expenditures, strategic investments. In FY23, the deficit reduced to ₹140 crore, showing a positive trend in managing operational cash flow.
| Financial Metrics | FY21 | FY22 | FY23 |
|---|---|---|---|
| Operating Revenue | ₹2,441 crore | ₹3,744 crore | ₹5,144 crore |
| Total Expenses | ₹2,386 crore | ₹3,753 crore | ₹5,135 crore |
| Profit/Loss | Profit of ₹61.6 crore | Profit of ₹41.3 crore | Profit of ₹21 crore |
| Cash from Ops | Surplus of ₹133 crore | Deficit of ₹354 crore | Deficit of ₹140 crore |
Funding and Investors:
Nykaa’s IPO:
Nykaa’s initial public offering (IPO) in October 2021 was a crucial event in its financial landscape. The Nykaa IPO raised ₹5,352 crore (US$670 million) at a valuation of US$7.4 billion from stock market. The great response from investors led to an 89.2% increase in stock value on the opening day, valuing the company at nearly US$13 billion. The successful IPO provided substantial capital for further expansion and also marked founder Falguni Nayar as India’s wealthiest self-made female billionaire.
Post-IPO Funding and Secondary Markets:
After IPO, Nykaa continued to absorb post-IPO funding. In November 2022, a post-IPO secondary round raised ₹336 crore, with Aditya Birla Sunlife Mutual Fund. The company also attracted funding from Aberdeen Standard Investments in a post-IPO equity round. Moreover, in November 2020, Nykaa got funding in the secondary market from Fidelity.
Series Funding Rounds:
Before the IPO, Nykaa went through numerous series funding rounds. Significant rounds include Series H in June 2020, where it raised ₹196 million from Sunil Kant Munjal, and Series F in May 2020, where Steadview Capital invested ₹67 crore. Series E in April 2019 brought in $14 million from TPG Growth. These funding rounds made Nykaa fuel its expansion, invest in technology, and acquire strategic assets.
| Funding and Investors | Date | Round/Type | Amount | Investors |
|---|---|---|---|---|
| Post-IPO Secondary | Nov 22, 2022 | Post-IPO Secondary | ₹336 crore | Aditya Birla Sunlife Mutual Fund |
| Post-IPO Equity | Nov 10, 2022 | Post-IPO Equity | – | Aberdeen Standard Investments |
| Secondary Market (Fidelity) | Nov 26, 2020 | Secondary Market | – | Fidelity |
| Series H | Jun 2, 2020 | Series H | ₹196 million | Sunil Kant Munjal |
| Series F | May 8, 2020 | Series F | ₹67 crore | Steadview Capital |
| Series F | Mar 31, 2020 | Series F | ₹100 crore | Steadview Capital |
| Secondary Market (Steadview) | Dec 1, 2019 | Secondary Market | $30 million | Steadview Capital |
| Series E | Apr 1, 2019 | Series E | $14 million | TPG Growth |
| Secondary Market (Lighthouse) | Sep 5, 2018 | Secondary Market | ₹113 crore | Lighthouse Funds |
Acquisitions:
Nykaa’s Strategic Acquisitions:
Nykaa’s acquisitions have played a major role in growing its product portfolio and market presence. In May 2019, Nykaa acquired 20Dresses.com, a women’s styling platform, infuecing its fashion offerings. In 2021, Nykaa Fashion expanded its presence by acquiring Pipa Bella, an Indian fashion jewelry brand, and Dot & Key Wellness, a skincare brand. These acquisitions not only diversified Nykaa’s product range but also strengthened its position in the beauty and fashion landscape.
Earth Rhythm and Little Black Book:
In 2022, Nykaa made bold moves by acquiring an 18.51% stake in Indian skincare brand Earth Rhythm. This acquisition matches with Nykaa’s commitment to offering a diverse range of skincare products. Additionally, Nykaa completed the full(100%) acquisition of lifestyle content platform Little Black Book (LBB). These acquisitions demonstrate Nykaa’s strategy to strengthen its presence across different parts of the beauty and lifestyle industry.
Innovative In-House Brands:
Nykaa has successfully developed a series of in-house brands, like Nykaa Naturals, Nykaa Cosmetics, and Kay Beauty. Collaborations with celebrities like Katrina Kaif and Masaba Gupta for exclusive product lines indicaates Nykaa’s ability to create unique offerings and capitalize on brand partnerships.
Corporate Social Responsibility of Nykaa:
Nykaa gracefully participates in corporate social responsibility(CSR), supporting initiatives such as education, health, women’s rights, rural development, and disaster management. Partnerships with organizations like CARE International Confederation, SPARSH India and others defines Nykaa’s commitment to making a significant impact on society.
Challenges and Criticisms:
Despite its triumph, Nykaa has faced challenges. Security issues related to an API flaw in 2019 raised concerns, prompting the company to address, resolve and justify the vulnerability. In 2022, Nykaa’s issuance of bonus shares led to criticism and questions regarding corporate governance, market manipulation, and tax avoidance etc.
Nykaa’s success story from a beauty-centric e-commerce platform to a comprehensive omnichannel marketplace is a testament to its adaptability, innovation, and strategic acumen. With a focus on customer satisfaction, diverse product offerings, and a commitment to social responsibility, Nykaa has not only transformed the Indian beauty and fashion industry but has also set new standards for e-commerce success. As it continues to navigate challenges and explore new opportunities, Nykaa remains a beacon of inspiration in the dynamic landscape of Indian business.
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