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Author: Disha Lakhotiya, II year of B.Com.(Hons.) from Hansraj College, Delhi

Co-author: Devina Ahirkar, II year of B.Com.(Hons.) from Dr. Ambedkar College, Nagpur

The beauty lies in the eyes of the observer, but the cosmetic industry never lost its magnetism. Who doesn't love a little glam up? Just a little touch-up before work or a full glam up for a night out.

But long gone are the days when you physically visit cosmetics stores to buy makeup and beauty products. Thanks to online trading. One of the online e-commerce platforms is Nykaa, acquired from the Sanskrit word nayaka, which means heroine or ‘the one in the spotlight. Nykaa was launched in Diwali of 2012 by founder Falguni Nayar, it was commercially available in 2013. And finally, in 2015 it had extended its sale from online-only to an omnichannel model and began merchandising its fashion products.

Nykaa was recently a buzzword uttered throughout the nation after its launch of the IPO. The IPO received a massive response from the public. This not only led to an increase in the funding and popularity of the brand name but also boosted the founder Falguni Nayar to become the exclusive part of India’s self-made billionaire women. But before we reach into the business let’s first get to know the mastermind behind the successful business.

Falguni Nayar, alumni of IIM Ahmedabad, was a former managing director at Kotak Mahindra Capital Company. But her dream of having a company of her own never ceased, so at the age of 50, she started a business. The choice of cosmetics came from her love of makeup and also the potential online market for the e-commerce business where there was the demand for natural and organic products.

Nykaa not only grew in the cosmetics sector but also in fashion. It had a variety of products that only a few cosmetic brands provided, and it had a huge impact on society. Not only are they ahead in beauty products but also the wellness products and men beauty products; Nykaa has helped to reach the audience to the next level.

At present Nykaa has stores in three formats namely Luxe, On Trends, and Kiosks. These formats are then divided into 80 stores. Luxe’s store features more luxury brands such as Dior, Estee Lauder, M.A.C Cosmetics, and more. As Nykaa is a multi-brand, with over 150 brands listed under them, they believe that private labels in fashion will have a higher percentage share and can contribute up to 40% as the business grows.

With the cut-throat competition in the beauty sector, you might wonder how Nykaa survived? Well, the answer resides in its business model. Nykaa’s business model is its Inventory Model, in this model, the company purchases its commodities from the manufacturer directly and then keeps the products in the designated warehouses. Then these products are either sold online or are transferred to the physical stores present in the whole country.

This type of business model helps the company to observe high-profit margins that result in a profitable business. This is in contrast to a marketplace model where the products are listed by third-party sellers like Flipkart, Myntra, Amazon, etc. This allows Nykaa to have a more secure clasp on its products and helps to avoid any forged products on its platform. Because of this people have a sense of security and do not hesitate to buy from Nykaa.

During the pandemic and the lockdown, Nykaa pivoted overnight to an essential-only store. And being omnichannel helped Nykaa in the pandemic. Nykaa launched a new category of hygiene essentials under its private label which includes hand sanitisers, masks, hand washes, personal protective equipment (PPE) suits, and thermometers. They contributed to social causes during the pandemic by joining hands with the PM Cares Fund to help the citizens of the country and even encouraged the customers to donate to these causes. They also contributed to the 'Give India Foundation' that provided medical appliances to hospitals in Maharashtra by arranging medical equipment such as N-95 masks, PPE kits, sanitisers, pulse oximeters for these hospitals.

Nykaa is amongst the few profitable etailers in India in the pandemic. The company reported a net profit of Rs 61.96 crore in the year 2020-21, a massive improvement from the net loss of Rs 16.34 crore in the FY20. Its revenue grew 28% YoY to Rs 2,453 crore in FY21. Nykaa received a primary investment of Rs 166 crores from Steadview Capital bringing its valuation to Rs 9100 crores ($1.2 billion) which made Nykaa the first profitable beauty company to enter the Unicorn Club.

Not only this but Nykaa had its IPO on 28th October 2021. The offer of shares consisted of fresh stock up to Rs 630 crore and an offer for sale that included existing shareholders offloading up to 43.11 million shares as mentioned by the company’s Draft Red Herring Prospectus (DRHP) approved by SEBI. The shares were listed at the price range of Rs 1085-1125.

On 10th November 2021, Nykaa was publicly listed for subscription on NSE and BSE. Nykaa received a massive response from investors in its IPO since the time it opened for subscription. It was subscribed 81.78 times with the majority of the investors being non-institutional buyers. As per the reports, the shares allotted for the qualified institutional buyers were subscribed 91.18 times, while that allotted for non-institutional investors was subscribed 112.20 times. With an upper price band of Rs 1,125, Nykaa IPO was eligible to raise to Rs 5,352 crore from its maiden issue and is aiming for an overall valuation of $7.4 Billion. Nykaa plans to utilize around Rs 130 crore from the IPO proceeds to pay off the debts and around Rs 200 crores for brand marketing.

The market in India for beauty products is still small and those who can indulge in the products are a small percentage of the 1.3 billion population. But the number is growing slowly but gradually, due to the advertisement and awareness created by the companies. Nykaa plans to expand its retail store service to 180 stores by 2024.Nykaa plans to continue to grow and become one of the successful and profitable company in the beauty industry. The eight-year-old venture has come a long way from starting an online company to stores to enter Unicorn and to a successful IPO. Nykaa is flourishing in the beauty industry in India and has also influenced in banishing the misconception that e-commerce and beauty retail does not work well in India.



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