‘Nykaa is all about creating demand for beauty products’
PremiumThere were a lot of naysayers, but we managed to replicate the physical buying experience in the e-commerce market, says Falguni Nayar, founder & CEO, Nykaa
FSN E-Commerce Ventures Ltd., the parent of beauty marketplace Nykaa, recorded a bumper market debut on the Indian exchanges on Wednesday, as shares of the company listed at 79.37% premium over its issue price. For Nykaa, the listing has been a journey of many firsts -- from being the first beauty marketplace brand and the only profitable unicorn listing on the Indian exchanges this year, to making its founder and chief executive officer (CEO) Falguni Nayar, India’s richest self-made billionaire.
In an interaction, Faguni Nayar and Anchit Nayar--CEO of Nykaa’s beauty e-commerce business, insisted that the company’s listing was a culmination of all the hard work bearing fruit. The duo also talk about Nykaa’s plans to balance growth with frugality, and the path ahead as a public company. Edited excerpts:
How do you feel about Nykaa’s blockbuster listing? Did you expect such a response from investors?
Falguni Nayar: I think today was a culmination of all the efforts made over the past years. We met over 100-120 global investors who saw our strategy, business plans and came back with endorsements. Nykaa’s listing today is a great feeling of fulfilment and a satisfying feeling that people are liking our business story. This is a culmination of all the efforts the team has put in.
Anchit Nayar: There’s excitement, there’s enthusiasm, and there’s a sense of accomplishment but more than anything I think there’s a sense of humility and understanding of the sheer responsibility we have as a company. I said in my speech at the listing ceremony today that our family was a family of four and Nykaa was the fifth member of the Nayar family and then it became a family of 3,000 employees and eventually a family of 300,000 shareholders.
What do you think are some key fundamentals which led Nykaa to this milestone?
Falguni Nayar: There were a lot of naysayers, but we came up with basic fundamentals and replicated the physical buying experience in the e-commerce market. At Nykaa, we always believed that we would be able to convince the user to buy beauty products. Nykaa is not about offline or online but about creating demand (for beauty products) among Indians, and that is truly what we have created.
What were certain learnings you received from investors during roadshows?
Anchit Nayar: For us what was amazing and heartening was just seeing these very high-quality asset managers, who have seen hundreds of businesses over their decades of experience, appreciating our business, our business model, the way we have built this company, (and) our future plans. That I think was a very nice affirmation that we as a company have done something right that has created a business that is unique.
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Nykaa has been built on frugality and not large pools of capital. Does this change now post the listing considering there is access to capital?
Falguni Nayar: We do hope things don’t change as a listed company. As I’ve always said, we are the guardians of investor trust and we would not like to change the way we function. But there’s always a ‘build versus buy’ decision, and there are acquisitions. But we would not like to compromise on the right capital efficiency while looking at acquisitions. We would not do anything irrational to chase topline. But rather focus on long term value creation.
Nykaa grew in a covid-impacted year and is also profitable. Do you think with growth, profitability will be impacted?
Falguni Nayar: In a covid-year we grew 30% which is phenomenal. We may not have the same marketing costs (as 2020), as we climb back to old levels of marketing costs with demand opening up. We will try to be profitable and the decision is always between customer acquisition and profitability. Nykaa’s business also has seasonality. While we focus on capital efficiency, this does not mean we compromise on growth.
How do we see you betting on your ‘house of brands’ strategy? Will we also see Nykaa creating newer private labels?
Falguni: We are a multi-brand retailer and are building our ‘house of brands’ strategy simultaneously. We have private labels in both fashion and beauty, and there’s scope for more across newer categories of home etc. We will not create brands for topline addition but rather where we feel there is a need. We will keep getting entrepreneurs to our ecosystem as well through acquisition. We call it ‘intrapreneurship’ which means getting external entrepreneurs to Nykaa.
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