IPO Note - FSN E-Commerce Venture (Nykaa) By Angel One
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Nykaa is a consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. The company has a diverse portfolio of beauty, personal care, and fashion products, including their own brand products manufactured by them. The company has an Omnichannel experience, online and offline with an endeavor to cater to the consumers’ preferences and convenience. The different consumer journeys exist in two business verticals, Nykaa- Beauty and personal care and Nykaa fashion – Apparel and accessories. Nykaa provides its customers with a wide variety of products and as of 31st Aug, 2021, Nykaa offered approximately 3.1 million SKUs from 4,078 national and international brands to their consumers.
Positives: (a) One of India's leading specialty beauty and personal care companies. (b) Major brands offering their products on Nykaa's platform for sale. (c) Company's advanced technology platform (d) Founder-led company with an experienced management team
Investment concerns: (a) Fail to acquire new consumers in a cost-effective manner. (b) Business depends on the growth of online commerce industry in India & company ability to leverage technology platform. (c) Business incurred losses in past which may impact value of equity shares. (d) Changing digital or business regulation in India.
Outlook & Valuation: The IPO is being valued at price/sales of 21.0-21.8x FY2021 revenues of `2,441 crore. The company has also posted strong revenue CAGR of 48.2% between FY2019-20 despite the Covid crisis and register a profit in FY2021. While valuations may appear to be expensive on a P/E basis Nykaa is one of the very few profitable Unicorns in India and we believe that the company is well positioned to benefit from the exponential growth in the online beauty and fashion retailing business over the next decade. Hence we believe that that the valuations are justified and hence we recommend SUBSCRIBE to the issue.
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