Nykaa files IPO papers with SEBI; this new-age internet company to raise Rs 525 cr via fresh equity

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August 03, 2021 11:08 AM

Cosmetics retailer Nykaa has filed its draft red herring prospectus (DRHP) with capital market regulator SEBI to launch an IPO.

Nykaa IPO, Nykaa public issueThere are no listed companies in India that engage in a business similar to that of Nykaa. Image: Nykaa Twitter

Cosmetics retailer Nykaa has filed its draft red herring prospectus (DRHP) with capital market regulator SEBI to launch an IPO. The public issue comprises fresh issue of shares worth Rs 525 crore, while the promoters and investors will sell up to 4.31 crore equity shares via offer for sale (OFS). Selling shareholders include promoters Sanjay Nayar Family Trust, and investors such as TPG Growth IV, Lighthouse India Fund III, Lighthouse India III Employee Trust, Yogesh Agencies & Investments Private Limited, JM Financial and Investment Consultancy Services, Sunil Kant Munjal, Harindarpal Singh Banga jointly with Indra Banga and others.

There are no listed companies in India that engage in a business similar to that of Nykaa. Kotak Mahindra Capital Company, Morgan Stanley India Company Private Ltd, BofA Securities India, Citigroup Global Markets India Private Ltd, ICICI Securities, and JM Financial. Link Intime India Private Ltd will be the registrar to the issue. The company has planned to utilise the net proceeds towards funding the investment in certain of its subsidiaries, namely, FSN Brands and/or Nykaa Fashion for funding the set-up of new retail stores worth Rs 35 crore; capital expenditure to be incurred by the company and investment in certain of its subsidiaries, namely, Nykaa E-Retail, FSN Brands and Nykaa Fashion for funding the set-up of new warehouses worth Rs 35 crore; repayment or prepayment of outstanding borrowings availed by the company and one of its subsidiaries, namely, Nykaa E-Retail worth Rs 130 crore; Rs 200 crore expenditure to enhance the visibility and awareness of its brands; and for general corporate purposes.

The promoters of the company are Falguni Nayar, Sanjay Nayar, Falguni Nayar Family Trust and Sanjay Nayar Family Trust. The weighted average return on net worth for the last three fiscals stood at 0.68 per cent. India has the second-largest urban population in the world. India will continue to grow across the digital use-case funnel, as there is significant headroom for growth at each level. This growth is expected to be driven by the affordability of the internet, continuous improvement in telecommunications infrastructure, increased adoption from Tier 2+ cities, the rising popularity of social media, competitively priced online offerings and growing trust and adoption of online payment platforms.

The number of online shoppers in India reached 150-180 million in 2020 (up from 120-150 million in 2019) with approximately 70% of these shoppers belonging to the non- Metro cities. These shoppers buy a variety of products online ranging from mobiles, electronics, fashion, beauty and personal care and groceries. The Beauty and Personal Care Market in India was sized at Rs 1,267 billion in 2019, growing at a CAGR of 13 pet cent in the last 3 years. Though the market fell down to Rs 1,120 billion in 2020 as a result of reduced spending during the first COVID-19 wave, it is projected to grow at a CAGR of 12 per cent to reach Rs 1,981 billion in 2025 implying a CAGR of 7.7 per cent from the pre-COVID-19 market in 2019.

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