Nykaa IPO opens Oct 28, price band at Rs 1,085-1,125 per share

FSN E-Commerce Ventures, operator of Nykaa beauty stores, has fixed the price band of Rs 1,085-Rs 1,125 for its maiden public share sale. The initial public offering (IPO) will remain open on October 28 and close on November 1.

At the top-end, the beauty startup will be valued at Rs 53,200 crore ($7 billion).

Nykaa’s IPO will consist of fresh equity issuance of Rs 630 crore and secondary share sale of Rs 4,722 crore. More than a dozen entities are divesting their holdings in the IPO. Some of them include promoters Falguni Nayar and Sanjay Nayar (through Sanjay Nayar Family Trust), private equity firms TPG and Lighthouse.

The total issue size works out to Rs 5,352 crore. This will be the biggest IPO since that of online delivery firm Zomato’s Rs 9,375-crore offering in July.

Zomato’s successful IPO and encouraging post-listing performance has buoyed investor sentiment towards startups.

Nykaa had filed its draft red herring prospectus (DRHP) with market regulator Sebi on August 2. The company has revised upwards the fresh issue component from Rs 525 crore to Rs 630 crore. The company has said it will spend Rs 234 crore “to acquire and retain customers by enhancing the visibility and awareness of our brands.” About Rs 156 crore will used for debt repayment and Rs 84 crore will be used for setting-up of new retail stores and warehouses.

Nykaa was set up in 2012 by Falguni Nayar, former managing director at Kotak Mahindra Capital Company. She along with husband Sanjay Nayar, former CEO of PE major KKR, hold 54 per cent stake in the company, which will be valued over Rs 28,700 crore at the top-end of the price band.

Nykaa’s IPO will require a compulsory 75 per cent qualified institutional buyer (QIB) participation as it has incurred losses in two of the previous three financial years. The retail quota of the IPO will be 10 per cent as against 35 per cent in IPOs that meet the profitability criteria.

Broking firm Jefferies in a recent note said Nykaa has demonstrated that growth and profitability don’t have to be mutually exclusive.

“The online opportunity in India is attracting players across categories and growth in most cases is at the cost of profitability. This, by itself, is a huge differentiator for Nykaa, a vertical e-commerce powerhouse in the beauty space. Product assortment, discovery and authenticity drive high repeats and the content ecosystem is engaging,” the note said.

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.