Nykaa IPO: Opens tomorrow; Key details that investors should know before investing

FSN E-Commerce Ventures Ltd, the parent company of online beauty e-commerce platform Nykaa, will launch its initial public offering (IPO) on Thursday, October 28, 2021.

The company has fixed a price band of Rs 1,085-1,125 per share as the company seeks to raise more than Rs 5,352 crore through the public offering. The company is offering a discount of Rs 100 per Equity Share to Eligible Employee Category.

The offer includes a reservation of up to 250,000 equity shares for purchase by eligible employees.

Bids can be made for a minimum of 12 equity shares and in multiples of 12 equity shares thereafter, a maximum of up to Rs 2 lakhs.

The IPO of Nykaa that will conclude on November 1, 2021, comprises a fresh issue of equity shares aggregating up to Rs 630 crore and an offer for sale (OFS) of up to 41,972,660 equity shares being offered by the selling shareholders. The company will not receive any proceeds from the Offer for Sale, while the net proceeds of the fresh issue will be used in:

• Investment in certain of its Subsidiaries, namely, FSN Brands and/or Nykaa Fashion for funding the set-up of new retail stores – Rs 42 crore.
• Capital expenditure to be incurred by the Company and investment in certain of our Subsidiaries, namely, Nykaa E-Retail, FSN Brands and Nykaa Fashion for funding the set-up of new warehouses – Rs 42 crore.
• Repayment or prepayment of outstanding borrowings availed by the Company and one of our Subsidiaries, namely, Nykaa E-Retail – Rs 156 crore.
• Expenditure to acquire and retain customers by enhancing the visibility and awareness of the brands – Rs 2,34 crore
• General corporate purposes.

Existing investors TPG Growth IV SF Pte, Lighthouse India Fund III, Limited, Lighthouse India Fund III Employee Trust, Yogesh Agencies & Investments Private Limited, and J M Financial and Investment Consultancy Services Private Limited are expected to offload their shares in the IPO.

Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, ICICI Securities Limited, Bofa Securities India Limited, JM Financial Limited and Citigroup Global Markets India Private Limited are the book running lead managers of the issue.

Company Strengths

• Chosen by brands like Charlotte Tilbury & Huda Beauty to import, launch and sell products in India.
• Portfolio of 13 owned brands such as Nykaa Cosmetics, Nykaa Naturals etc.

Potential Risks

• Inability to acquire new customers cost-effectively may impact business.
• Inability to manage growth or execute strategies may impact future business plans.

Timeline of the Issue

• Bidding period: October 28 – November 1, 2021.
• Allotment: November 8, 2021.
• Refund Initiation: November 9, 2021
• Share Crediting: November 10, 2021.
• Listing: November 11, 2021

The company received SEBI's go-ahead on October 11, 2021, to launch the initial share sale.

FSN E-Commerce Ventures Ltd is a digitally native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. Since its incorporation in 2012, the company has invested both capital and creative energy towards designing a differentiated journey of brand discovery for our consumers. It has a diverse portfolio of beauty, personal care and fashion products, including our owned brand products manufactured by third-party manufacturers for us. As a result, it has established itself not only as a lifestyle retail platform but also as a consumer brand offering an omnichannel experience to the consumers.

The company in a statement in its red herring prospectus has said that it has a large market opportunity aggregating Rs 10.6 trillion (US$152 billion) in the growing beauty, personal care and fashion industry by the calendar year 2025 in India. The Indian beauty and personal care market are estimated to grow to approximately Rs 2.0 trillion (US$28 billion) by the calendar year 2025 from Rs 1.1 trillion (US$16 billion) in the calendar year 2020. The Indian fashion market is estimated to grow to approximately Rs 8.7 trillion (US$124 billion) by the calendar year 2025 from Rs 3.8 trillion (US$54 billion) in the calendar year 2020. (Source: RedSeer Report, which has been exclusively commissioned and paid for by us in connection with the Offer).