Nykaa: Fashion, Diversification, and Going Public—A Case Study

Nykaa: Fashion, Diversification, and Going Public—A Case Study

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A Brief Overview of Nykaa

Founded in 2012 by Falguni Nayar, Nykaa is a leading online destination for beauty and wellness. With over 2500+ brands and 5 lakh+ products, this e-commerce platform bridges the gap between customers and sellers of beauty products.

Derived from a Sanskrit word, Nykaa refers to “someone in the spotlight.” The success story of this prominent e-commerce destination is inspiring and noteworthy. Nykaa has seen an upward graph since the very beginning, making it one of the successful players in the online beauty space. 

The company commenced its journey as an e-commerce store where buyers could easily purchase beauty and haircare products from several renowned brands with a few clicks. But over time, the portal has expanded to sell beauty, fashion, and wellness products across the website and mobile app. Nykaa also runs over 76 outlets to facilitate the buyers who still prefer offline shopping. 

Rough Timeline of Nykaa’s Success and Milestones

The inventory-led business model of Nykaa helped the company become profitable and successful. While offering plenty of products, the e-commerce portal also believes in authenticity and follows competitive pricing to handle customers of all tastes and preferences. 

Here’s the timeline of Nykaa’s biggest, notable milestones.

  • 2012: The company was founded.
  • 2013: The portal began functioning commercially.
  • 2015: Shifted from online-only to an omnichannel business model.
  • 2020: It became the first unicorn startup headed by a woman.
  • 2020: It ventured into the world of fashion by launching Nykaa Design Studio, which was later renamed Nykaa Fashion, and also launched a men’s grooming segment named NykaaMan, India’s first multi-brand store exclusively focused on men’s grooming.
  • 2020: It also went ahead to launch Nykaa PRO, a premium membership program that allows members to enjoy exclusive deals and access professional beauty products through the brand’s app.
  • December 2020: The first brick-and-mortar Nykaa store was launched in Delhi.
  • October 2021: Nykaa opened its IPO (Initial Public Offering). This was the first-ever IPO by an online beauty retailer in India.

How Does Nykaa Differentiate Itself from the Competition?

Being a frontrunner comes with its fair share of difficulties, where one has to keep thinking outside the box constantly. Nykaa has differentiated itself from its competitors by following a well-planned and diverse business model.

The brand has created a mutual relationship of benefit with its buyers and suppliers. The brand keeps itself in the limelight by offering a huge variety of luxury products and exclusive brands, like Katrina Kaif’s Kay Beauty, and designer brands like Dior, Charlotte Tilbury, Estee Lauder, and many more, that are not available anywhere else. A partnership with these premium brands ensures that the brand continues to attract and retain its customers. Thus, the brand benefits from the increased demand for these exclusive products, and the customers also find a variety of luxury products in one place.

Apart from this, the brand functions as a multi-brand retailer that sells cosmetic, fashion, and wellness products. The brand integrates vertically, albeit within the limits of the beauty and wellness space, onboarding new and exclusive brands regularly. This renders it unique from other online retailers that integrate vertically to include all categories of products. Thus, Nykaa remains diversely unique from its competitors and enjoys a vast customer base that patronizes and loves the brand at all stages. 

Nykaa’s Business Model

Nykaa’s Business Model

Nykaa follows the inventory-based business model to make high-profit margins. This D2C ecommerce brand buys products directly from the manufacturers and stores them in designated warehouses located in Mumbai, Delhi, and Bengaluru. These products are then sold either on Nykaa’s official website or through its 3 store formats, namely, Nykaa Kiosks, Nykaa On Trend, and Nyka Luxe. 

Nykaa’s Revenue Model

The leading e-commerce portal, Nykaa has reported a surge of 38.10% in its revenue from what it was in the last year. The total revenue of Nykaa in FY21 is calculated as US $324.77 million (approximately Rs 2,440.89 crores). This leading beauty portal has several ways through which it earns revenue. Some of them are mentioned here. 

Banner Advertisements: These advertisements draw lots of traffic to the company’s website, leading to conversions and sales. 

Sale of Products: The e-commerce platform sells its own products to earn high profits. Moreover, Nykaa is in partnership with 2000+ brands and earns revenue by selling their products. 

While these are the primary source of earning revenue, the brand also makes huge profits from discount income, commissions, and other miscellaneous sources. 

Nykaa’s Growth

Nykaa’s Growth

The thing that makes Nykaa stand out from the crowd is its ever-increasing success graph. This e-commerce portal has never faced a downward trend, thanks to its product authenticity, excellent customer service, and competitive pricing. 

At present, Nykaa boasts over 5 million monthly active users, a milestone for any e-commerce portal. Let’s find out some of the brand’s major highlights that make it different from others. 

  • It works on an omnichannel business model and has 70+ stores across the country. 
  • The portal is partnered with more than 500 brands. 
  • It has over 15 million registered users. 

In addition to the points mentioned above, Nykaa has recovered from the post-pandemic effects by more than 90% from what it was during the pandemic towards the end of 2020. The beauty and wellness space has seen a significant shift of buyers towards the essentials, including personal skin and hair care items. 

This changing customers’ behavior has helped the brand beef up faster than expected from the pandemic’s ill effects. What adds more spark to the portal is its omnichannel retail model. It entertains both conventional and tech-savvy consumers. Hence, it earns a good revenue as compared to its competitors. 

Nykaa IPO Details—Why, When, How, & Way Ahead

Nykaa has recently entered the public sector by commencing its Initial Public Offerings, making it a buzzword in all media outlets. You may ask: Why has the company decided to go public? Nykaa is barely ten years old, and its decision to go public has baffled everyone. Here are the insights into the Nykaa IPO details to resolve this pertinent question.

Nykaa is one of the leading profitable startups in the market. CEO Falguni Nayar announced that the portal has witnessed a surge in its profit margins and sales and launched its Initial Public Offerings. The Nykaa IPO details were made public for subscription on 28 October 2021 and remained open till the 1st of November 2021. The brand had fixed a per-share price between the range of Rs 1,085-1,125. Nykaa had also sought a valuation of US $7.4 billion (Rs 52,574 crore) for its upcoming IPO round. The brand has turned into a public company limited by shares on July 16, 2021, and filed its DRHP (Draft Red Herring Prospectus) in August 2021. 

Nykaa’s parent FSN E-Commerce has clocked a record surge of its share values on 10 November 2021, resulting in 96% returns on the investments of the brand’s investors. The issue price of FSN E-Commerce’s shares was Rs 1,125, which opened at a listing price of Rs 2,018 apiece. The stock closed at Rs 2,206 per share on the BSE, around twice the initial offer value, pocketing a profit of 96.26%.

The brand made a dream debut in its IPO, where the market cap of Nykaa surpassed Rs 1 lakh crore. The company has evaluated that its shares are 81.78 times oversubscribed at the end of the IPO round on 1 November 2021. While the net worth of Falguni Nayar rose to US $6.5 billion (Rs 56,600 crore) after the record listing of the brand, the valuation of Nykaa surged around $13 billion (Rs 9,66,30 crore) in its Indian market debut. 

On November 15, 2021, FSN E-Commerce reported a sharp decline in its profit margins which, in turn, resulted in a fall in the share price. The decrease in the brand’s profits is traced to the rise of its marketing cost in the quarter before its IPO. The net income of the brand was recorded at Rs 1.2 crore in the quarter that ended in September. The company’s shares also decreased by 5.2% on November 16, facing a decline of close to 7.3% at an earlier trade. It is also noted that a 92% increase in the expenses helped Nykaa witness a 47% increase in its revenues.


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