What is your view on the Nykaa, now that SEBI has given approval for the IPO?

SEBI has granted approval for the initial public offering of FSN E-Commerce Ventures Ltd, the holding company that owns and operates the online beauty and fashion store brand, Nykaa. The brand was launched in 2021 by Falguni Nayar, the former head of investment banking at Kotak Mahindra Capital. The issue size has been revised up from Rs.4,000 crore to Rs.5,300 crore and the deal is likely to value the company at close to Rs.45,000 crore.

The final call on the valuations will be taken by Nykaa and its merchant bankers closer to the actual issue, which could be closer to the end of the month. As per the DRHP, the issue was worth Rs.4,000 crore consisting of a fresh offer of Rs.525 crore and an offer for sale of Rs.3,475 crore. Other institutional investors in the company include Lighthouse, TPG apart from the family offices of Sunil Kant Munjal, HS Banga and Narottam Seksaria.

Nykaa will allocate 75% to QIBs and just 10% to retail investors. Interestingly, Nykaa is one of the few digital platforms that is profitable. It just turned around from loss to profit in FY21. For FY21, Nykaa had reported gross merchandising value (GMV) of $540 million. Nykaa achieved EBITDA break-even in FY19, and today the EBITDA margin stands at 6.6%. The promoter family of Falguni and Sanjay Nayar own a total of 54% in FSN E-Commerce.