Nykaa Planning to Go Public Soon, Sure Indicator of IPO Boom in 2021

The beauty retailer Nykaa is planning for an IPO early next year, which could also happen overseas, as per reports. It became a unicorn after securing a Series F funding round in April 2020. Out of 13 companies that went public in 2020, nine of them delivered listing gains for investors, and it is surely encouraging them to look for more IPO bets this year.

Nykaa, the app-based Indian cosmetics retailing startup, is planning to go public by early next year at the valuation of over three billion USD, according to the reports (1).

The news of Nykaa’s plan for an initial public offering came after Burger King India, Mindspace Business Parks REIT, and Mrs. Bectors Food observed successful listings and excellent subscriptions. 

According to Bloomberg (2), the private equity company TPG backed startups is currently working with advisors to prepare for a share sale in Mumbai. 

Nykaa, founded by Falguni Nayar (3), a former investment banker, is leaning towards a domestic listing. However, reports suggest that they are also considering share sales overseas. 

According to people aware of the matter, ongoing deliberations and the offering details such as the timeline and size could change. 

It is worth highlighting that previously in 2018, the founder and Chief Executive Officer Nayar had told the Indian news agency PTI in an interview that the firm is planning for an IPO in two years (4).

Nykaa considers TPG and Indian tycoon Sunil Munjal’s family office Hero Enterprise among its backers, according to media reports. Last year in November, Nykaa had also received an undisclosed amount from Fidelity Management and Research Co. in its latest funding round.  

Nykaa, founded in 2012, lists over 1,200 brands ranging from skincare, makeup to health supplements, and beauty appliances.

According to the website (5), they have clocked 55 million monthly visits. And their six warehouses across the country have received more than 13 million orders each month. 

Undoubtedly, the startup is among firms who have benefited as Indian customers have increasingly shopped online, a trend boosted by the pandemic-resultant lockdown in 2020. 

Let’s dig in more to find Nykaa’s IPO planning and what India expects with initial share sales in 2021. 

The Altered Plans

The company offered a partial exit to its early investors and employees with its last funding round in November 2020 via India’s seconder transaction. The deal valued the company slightly above 1.8 billion USD, as per an anonymous source (6). 

According to the source, Nykaa would most likely achieve overall profitability in 2021 before going public. The company may also look at a listing with a valuation of much more than three billion USD considering the boost in business post lockdown and consumer digital shift. 

“Beauty platforms such as Nykaa have enough headroom to expand in the beauty and personal care market, especially given the gap in supply and latent demand in the premium and mass segment. They have solved the supply gap via an omnichannel play coupled with a deep and wide product portfolio and consistently high availability. Moreover, positive unit economics makes them well-positioned for public markets.” – Rishav Jain, senior director and lead, Alvarez, and Marsal (7).

Jain further added that the coronavirus pandemic had offered tailwinds to ecommerce by increasing customer online platforms adoption. It has ultimately also enhanced the investment view in tech-based businesses. 

Nykaa has now joined the ecommerce major Flipkart, food delivery startup Zomato, furniture e-tailer Pepperfry, and online grocery firm Grofers, which are also planning for IPO. 

In 2018, the founder had stated that the company would look for an IPO by 2020, but the pandemic has seemed to have lightly decayed their plans.


Market Impacts

The blockbuster IPO debuts of Burger King India, Mrs. Bector, and Happiest Minds in the Indian stock market in 2020 have only led the local emerging tech startups to gear up the confidence they needed to knock on the public market doors (8). 

2020 ended with two hot tech IPOs in the US share market; Airbnb and DoorDash. Their success has also impacted Indian investors and their belief in tech startups. 

“The Indian IPO market has realized the potential of startups that disrupt traditional businesses or ways of doing business and garnering large market share in different segments. Recent IPOs by Route Mobile, Happiest Minds, CAMs, or Burger King have all been oversubscribed many times and debuted with high multiples.” – Anup Jain, Managing Partner, Orios Venture Partners (9).

While Nykaa and other Indian startups such as Zomato, Delhivery, FreshWorks, Policybazaar, Flipkart are eying for an IPO this year, several others such as Byju’s haven’t yet set a timeline. Still, media reports suggest that they are also getting ready for a big, fat public debut. 

The Indian government also seems to be welcoming tech IPOs with its market regulator, SEBI, Securities and Exchange Board of India, setting up an IGP, Innovators Growth Platform. It has also recently announced a consultation paper for comments on new rules that could encourage startups to head for public listings. 

“There are certain tailwinds which are propelling startups towards IPO for fundraising and to offer investors with a fine fettle exit. The new touchstones announced by SEBI, such as facile migration to the mainboard decreased holding period, and special rights have made IPO more lucrative.”

– Ankur Bansal, co-founder, and director, BlackSoil (10).


A Long Road Ahead

While pandemic enabled wide adoption of digital-first startup’s products and services, both B2B and B2C models, to the contrary, low investor confidence has also forced these companies to prioritize profit overgrowth. It has resulted in the fine-tuning of their business models, which has made them more agile and scalable.

Even listing in the overseas market is not necessarily easier since it would require many structuring efforts for Indian startups. Even though the US and UK markets have friendlier regulations regarding profitability, they need access to a larger capital pool, forex access, sophisticated retail investors, and global recognition and footprint. 

While talking about startups listing in the overseas market, Pankaj Makkar, the Managing Director of Bertelsmann Indian Investment (11), stated that the pros and cons depending on where startups are eying for listing and the cost compliance challenges. It is entirely on cases to case basis since several firms may find benefits in overseas listing. 

Makkar added that if a company wishes to list overseas, startups may require restructuring their business for legal purposes unless the new regulations come into play. While the Indian government’s proposed law that would allow direct overseas listing is a welcome move, the market is still looking forward to detailed guidelines.

According to a 2019 survey of Indian startups by the BRI, Reserve Bank of India (12), about 58% of 1,246 surveyed startups plan to go for Indian stock market exchanges listing in the upcoming five years. 

However, less than one-fifth, about 250 startups of the survey respondents had a turnover of more than one crore INR, and a whopping 70% were an early stage in terms of revenue generation and younger than three years. It means that only a snippet of these companies would meet the profitability criteria. 

Several other analyses indicated that Indian tech startups prefer nations with tech-advanced markets and tech-aware investors like the US or Singapore over India for IPO. There are beliefs that the US stock market would bring them more visibility and a better chance of winning global markets because it is the biggest tech hub on the planet and home to Silicon Valley.


2021: A Blockbuster Year for Indian IPO

Regardless of these analyses, after a decent show last year despite the pandemic resultant economic slowdown, the IPO market is awaiting a whopping crop with over 30 IPOs worth more than 30,000 crore INR lined up (13).

Consumer companies are set to dominate the 2021 IPO street market with Nykaa, Indigo Paints, Kalyan Jewellers, Zomato, and others. 

And if the government walks in its high talk of taking India’s financial mammoth LIC public, then 2021 would be a record year for IPO that would probably never be broke as LIC will command a valuation that would run into trillions of INR. 

“I believe the IPO pipeline would continue to remain robust in 2021 as there are quality issues plenty in the line-up. In the last three years, there have been several quality companies hitting the market and rewarding investors big way.” – V Jayasankar, Senior Executive Director and head of equity capital markets at Kotak Investment Banking (14).

Jayasankar added while several financial services and Industrial companies such as UTI AMC, SBI Cards, and Gland Pharma tapped the market in 2020, this year would be hit by several consumer-focused firms. 

He argued that India is among the fastest-growing consumer economies. Considering that several firms are growing in sizer and wanting to go public to raise capital, there is huge interest from domestic and foreign investors for consumer-focused companies. 

Concurrently, Kotak Mahindra Capital Company’s top officials also expect that the IPO market in 2021 would easily cross the 50,000 crore INR mark. Indicating that the new year would be another blockbuster for the initial public offering market. 

The top draw sectors would most likely be technology, FMCG, healthcare, and financial services, where IPOs will come in significant numbers. 2021 is also likely to witness good activity on the public sector front, considering the recent success in IRCTC offer for sale and a good appetite for qualified institutional placement for Canara Bank (15). 


Driving the IPO Boom

According to industry experts, investors’ excellent returns, especially in the retail segment, are likely to encourage them to look for more IPO bets in 2021. Indian companies have raised more than 26,000 crore INR through shares in 2020, which is over double that of 2019 (16). 

Anuj Kapoor, the Managing Director and investment banking head at UBS India (17), believes that 2021 may be the year for IPOs. Last year, the market witnessed several QIPs, especially from financial services, while some that would continue this year, IPO activity should be higher than in 2020. 

He further added that considering the positive market environment, companies who had to put their IPO plans on hold amid the COVID-19 pandemic have also accelerated their plans. 

The market has also observed better corporate earnings in the recent quarter, and there are expectations that the economy would bounce back strongly this year. It should also aid the IPO plans of many companies, and based on the pipelines, Q1 seems to be a busy time for IPOs.

Well-prepared companies would look to launch IPOs in the short future to gain benefits from the present exuberance in the secondary markets. 

Additionally, over the past few years, the IPO window has turned narrowers. Previously, investors used to see a few regulatory deals; there is a huge bunching up of deals in the past five years. These are the windows where investors could find the secondary market exuberances and are prepared to tap that opportunity. 

There is no doubt that companies ready with SEBI approval would try to launch deals shortly.  

+ posts

Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

Disclaimer: The views, thoughts, and opinions expressed in the article have been curated for our audience and does not warrant a 100% accuracy. All the information mentioned in the article is subject to change according to the changing viewpoints. Feel free to reach us at [email protected] for any change or copyright issues.

Note: If you buy something via a link on this page, we might earn a small commission on it.

Rucha Joshi
Rucha Joshi
Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

Leave A Reply

Please enter your comment!
Please enter your name here

related stories

Lowering the commission fees for small developers fails to address the broader issues over the tech giants' monopolistic business.

Tech Giants’ “Goodwill Gestures” Won’t Save Them From Regulators and Critics

The Amazon Appstore has also joined Apple and Google in reducing commissions for small app developers. However, it has an appealing twist.  It is an...
PhonePe has filed additional complaints to SEBI in India after filing a lawsuit against Affle Global and Venture in the Singapore Highcourt.

PhonePe’s Battle With Ventureast and Affle Over Indus OS Deal

PhonePe, Walmart-Flipkart owned digital payment firm, has filed a formal complaint against VPF, Ventureast Proactive Fund-II, an AIF operating out of India, with SEBI,...

Microsoft Windows 11: Coming Soon?

It has been more than six years since Microsoft first announced Windows 10. Even though the current OS operating system has received multiple updates...
Apple is bringing one of the trendiest streaming features to iPhone users with the launch of SharePlay in iOS 15 later in 2021.

SharePlay: Apple’s Latest Game to Stay Relevant Unveiled At WWDC 2021

Apple is bringing one of the trendiest streaming features to iPhone users with the launch of SharePlay in iOS 15 later in 2021, allowing...
The coronavirus pandemic has forced Bollywood to press pause for over a year now, dousing the entire entertainment industry in unprecedented damages.

Bollywood Struggles, Mass Vaccination, and Its Altered Future

The term "Bollywood" conjures illustrations of ubiquitous stars. On the contrary, however, every movie produced in Mumbai is possible by an army of people...
China's ride-hailing giant, Didi Chuxing, which owns the largest market share in the nation of 1.4 billion people, is looking to go public.

China’s Didi Could Be World’s Biggest IPO in 2021

Didi Chuxing Technology Co., China's ride-hailing behemoth, made its IPO, Initial Public Offering, papers public on Thursday, setting Beijing's company up to secure billions...
Softbank is now looking to add food-delivery tech to its portfolio by investing 450 million USD in Swiggy's series J funding round.

What Does SoftBank’s Investment Mean for Swiggy?

SoftBank, a Japanese conglomerate's Vision Fund II, SVF2, has sought approval from the CCI, Competition Commission of India, to invest in food delivery company...
Despite the obvious benefits, most Indian brands are oblivious to business around women-specific needs.

The She Economy: The New Mantra for Business Success

As a market, women offer an opportunity bigger than India and China combined.  According to Frost & Sullivan's 2020 Global Mega Trends to 2030 (1) research, women...