Today I am going to discuss about an IPO which was discussed by numerous people. This is about Nykaa a female focused beauty products seller. This is not just a start up but also a profitable one which is a very rare combination in the startup industry. After reading this article you can decide whether you want to invest in this particular company or not.
So let us know the full story of Nykaa which is quite interesting. You may know that big unicorns like Phone pe, Paytm, Oyo are facing huge loss in every quarter of every year but at the same time this company is making profit every year. Last year it make around 60 crore rupees as profit.
The reason behind this profit is the monopoly of the company. They mainly cover beauty and personal care for women which is around 30 percent of whole market. Nykaa has 13 sub brands which is also profitable for the company.
They have different inventory policy than most other e-commerce platform like amazon, flipkart or Myntra. Other E commerce platform does not buy third party seller products rather than they listed in their platform. When a buyer gave an order, that platform take the product from the third party seller and dispatched that. So they mainly don’t rely on their inventory.
In case of Nykaa they purchase the products from the third seller and listed in their platform. So when an order is placed then it directly deliver from their inventory. For these there is minimal chance of giving fake products. That’s why they can have an loyal customer base.
At present there is very few competition of Nykaa. They even started to open physical stores around the country. When pandemic hit this company started to get more profit than before as people start to buy products from online rather than market. The average order value also increases from 1433 rs to 1963 rs in just two year which is greater than average beauty order in the market.
Thus their sales and profit is growing around 40 percent compound rate. As beauty products have high margin it is very profitable and hot business. So various big companies are trying to enter in this market. So they invested in MyGlamm which is also in similar business. Grofers also invested in Orange something which manage everything from production to selling of beauty products. So it is expected that this company can get tough competition in future.
Nykaa has also their fashion business. In the time of covid they manufactured masks to personal care products, so we can say that this is an opportunistic company. India`s large young age population have higher purchase value which will directly impact in sale of the company. But at present as the female population is just 20 percent of total workforce which may be an alarming for Nykaa.
There are some social media posts where it is circulating that Nykaa`s management bully their workers, they regularly use racist words. For this toxic culture many people resigned from this company. Though it is not affecting the fundamentals now but can affect in future time. Though Nykaa completely deny that fact.
In the conclusion we can say that Nykaa is mainly a family business where majority stakeholders are from their company. Falguni Nayar, who is Ex Managing Director of Kotak bank founded this company with her 14 crore rupees. Later she raised 2500 crores from Venture Capitalist.
People have interest in this company seeing the strong fundamentals. It is also expected that it will get a good listing gain in the IPO. But they depend on some other factors too like market buzz, grey market premium etc. What is your opinion about the company do let us know.