BizReview Ep6: The Nykaa Story

The E-commerce boom in India started when Sachin and Binny Bansal delivered “Leaving Microsoft to Change the World” by John Wood. The order, placed at 22:24:17 hours on October 22nd, 2007 shaped the landscape for the coming several decades and led to the emergence of multiple businesses, jobs and business process concepts. At the forefront of this revolution was the then Managing Director of Kotak Investment Banking, the IIM-Ahmedabad alum Falguni Nayar, who left her job and took the leap of faith to start what we’ve known for the past 12 years as ‘Nykaa’.

A seasoned business professional, Nayar was quick to identify the gaps in the booming cosmetics and beauty industry. Reliability, Quality and Price were the three main concerns identified, and the need for a young, Indian brand was imminent. With limited experience in retail, beauty or IT, Nayar jumped in to fight against legacy European names of the likes of L’oreal and M.A.C. among others. Within a few days of operations, Nykaa managed to fetch sixty orders capitalising on the huge demand of products in the market - and soon, they became a renowned name, synonymous with quality, affordability and convenience. 

There weren’t any brands serving the needs of the Indian consumer - the brown, natural shades of ours weren’t catered to and that’s where Nykaa saw the gap. Nayar said, “We’d rather sell the proper shade of lipstick at full price than the wrong shade at half price.” With three employees, Nykaa started as an online platform, which later shifted to an omni-channel approach, having gained recognition for offering a wide variety of beauty, fashion, intimate apparel and cosmetics. 

As a D2C consumer products E-Commerce brand, Nykaa operates on an inventory driven model, wherein it purchases products directly from manufacturers and keeps them in warehouses from where they use their data to predict demand and aim to match supply well-in-advance. The inventory-led model of business of the company helps the company witness high-profit margins and has resulted in a profitable business. Besides, the company also ensures the authenticity of products and follows competitive pricing.

Over the past years, Nykaa has managed to create a sustainable business with increasing revenue trends, a healthy EBITDA and decent profits. The company managed to generate INR 5144 crores in revenue for FY23 with a profit of INR 21 crores. As one of the first Indian E-commerce startups to get listed, Nykaa opened its IPO on October 28, 2021 at an issue price of INR 1125. The issue was oversubscribed by 82 times and gained bids worth a total of $32.53 billion. Nykaa shares were listed on the BSE for INR 2001, a 78% premium and following a 1:5 stock split or bonus issue a short while back, the share price currently trades at 170 which is much lower than the adjusted listing price of 333. 

On the business front of things, Nykaa has 2400+ brands and 1.2+ lakh products as of July 2024. It has occupied over 5 million sqft of warehouse space, claims to have 21 million+ users, has 72+ luxe and on-trend and kiosk stores, 20 fulfilment centres and 23 warehouses. With heavy upcoming competition impeding from Tira and Purplle, Nykaa’s future seems interesting with huge growth opportunities.