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India Beauty eCommerce Platform Nykaa Aims for IPO

India’s largest pure-play e-commerce niche player Nykaa has filed for an IPO that could value the platform at up to $4 billion.

Nykaa’s plans to offer up to 43 billion shares worth 5.25 billion rupees, or $70.8 million, are seen by industry analysts as timely despite the pandemic.

Abneesh Roy, Executive Director at Edelweiss Financial Services said, “Nykaa is clearly India’s number-one pure-play eCommerce niche player — it’s a great brand both for consumers and consumer goods companies.”

“When you speak about Hindustan Unilever, Dabur, Marico, Emami, L’Oréal — they are all present on Nykaa as a platform and are happy with the customer profile and the kind of sales they are getting on it. So are premium and global brands. Their strong omnipresence is good, with 73 [brick-and-mortar] stores. In beauty and personal care, that is important because consumers really like to see how the products fit for them, it gives the customer both comfort and a sense of authenticity,” he added.

The global Nykaa marketplace gives Indian consumers access to brands that are not available elsewhere in India, while the platform also offers labels such as Estée Lauder, Christian Dior, Guerlain, Bulgari, and Huda Beauty. Analysts reiterated the attraction of a niche player that has sprung up to provide a strong retail presence in the $16 billion Indian beauty market, which has been growing at 12 percent annually even over the last year, and which is expected to reach $28 billion by 2025.

The filing for an IPO with the SEBI is being hailed as a milestone for Indian markets as Nykaa is one of the few start-ups going for a stock market listing after declaring a profit. It also is one of the rare Indian companies led by a woman, Founder, and Chief Executive Officer Falguni Nayar, a banker-turned-entrepreneur.

Roy pointed out that the beauty segment in India has also benefited from several more focused moves by Nykaa, including strong segmentation of verticals and a considerable inventory. “They have segmented the consumer in a very good way, with divisions within beauty, including men’s, naturals and then realizing the same consumer would be drawn to fashion and jewelry. They also benefited from introducing private labels, which are more profitable because you control the entire value chain and there is no revenue share with the brands,” he said.

“The other advantage Nykaa has is that of an inventory model, which has been particularly successful in the beauty space in India, not only for faster delivery but because the possibility of counterfeit is lower because of more direct sourcing. There is a competition of course, with other e-commerce players, consumers do visit all the popular sites, but a niche and focused play help. Nykaa has more than 2 million stock-keeping units, and it had close to 17 million orders placed in beauty and personal care in this financial year,” he added.

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