As the Covid-19 pandemic stifled businesses from airlines to tourism, Nykaa, an online retailer of beauty products, was sitting pretty. Hordes of shoppers, stuck at home due to pandemic-imposed restrictions, flocked to its virtual shelves, buying up everything from skin creams to lipsticks. Thanks to this sales surge, Nykaa expects to report a 40% rise in revenue for the year ending March 2021, up from $247 million in March 2020.
The cosmetics retailer, which counts Boston asset management company Fidelity Management and private equity firm TPG Growth Capital among its investors, is prepping for an IPO this year that’s expected to value it at around $3 billion. But even before that happens, Nykaa’s latest funding round, which is expected to close by the end of this month, is likely to propel its founder Falguni Nayar into the billionaire ranks, making her India’s second-richest self-made woman after biopharma billionaire Kiran Mazumdar Shaw.
Nayar, who owns a little more than 50% of the beauty retailer, would not comment on her net worth or the fund-raising.
The Indian beauty and personal care market is expected to grow to $23 billion by 2023 from $13 billion in 2018, according to Gurgaon-based consulting firm Technopak, which says it will be boosted by rising incomes of young Indians.
“Nykaa has become synonymous with beauty products,” says Saloni Nangia, president of Technopak. “It spotted the right trend because we never had a consolidated beauty play in India before. There were always many formats, but they were all small-scale.”
Nayar, a former banker, started Nykaa at age 49, after quitting her job as head of Kotak Mahindra bank’s investment banking arm in 2012. With $2 million as seed capital from family savings, she thought the time was ripe for an Indian version of Sephora, the international cosmetics chain.
Starting off as an online retailer, Nykaa, which is derived from the Sanskrit word “Nayaka,” meaning one who’s in the spotlight, expanded later into brick and mortar stores. The company now has 70 stores across 34 cities and its website and app draw 60 million monthly visitors.
Nykaa disrupted India’s beauty market by selling luxury brands such as Clinique and Bobbi Brown online. By sourcing products directly from authorized distributors, Nykaa built a reputation of quality and authenticity in a market rife with spurious cosmetics. The online model allowed Nayar to create an endless aisle of products from across the globe, Nykaa currently offers more than 700,000 products.
Nayar has shunned discounting and used marketing strategies such as beauty blogs by influencers who provide updates on new products and trends. Realizing that customers like to touch and feel and try on cosmetics before buying them, she added bricks to clicks, opening the first Nykaa store in Delhi in 2015.
Nykaa, which became a unicorn last year, has so far raised a total of $70 million in primary funding from marquee investors, including consumer goods billionaire Harsh Mariwala and commodities billionaire Harindarpal “Harry” Banga.
“It has been remarkable watching Nayar transition seamlessly from one of India’s leading investment bankers to a phenomenal entrepreneur in the beauty, fashion and technology space,” says Angad Banga, son of Harry Banga, whose Hong Kong-based family office holds a 10% stake in Nykaa. (Angad used to work at KKR with Nayar’s husband Sanjay Nayar, who heads the American private equity firm’s India unit.)
Nayar’s entrepreneurial journey has been far from smooth. She faced a big learning curve as she navigated the worlds of beauty, tech and retail. Three chief technology officers quit in the first four years. Despite being a banking veteran, fund-raising was a challenge initially—a far cry from the current circumstance that sees Nayar being wooed by investment banks seeking to list her business.
Today, she’s also facing off a raft of competitors, such as department store chain Shoppers Stop, controlled by billionaire Chandru Raheja, and Amazon, which has built a formidable online presence in India. But Nayar, whose family has always supported her beauty venture, has both her 30-year-old twins working with her. Son Anchit heads the online business and daughter Adwaita, who used to be Nykaa’s chief operating officer, is CEO of its fast-rising clothes retailer Nykaa Fashion.
To add buzz to its offerings, Nykaa forged a joint venture with Bollywood actress Katrina Kaif called Kay Beauty in 2019, to offer a new cosmetics line. Technopak’s Nangia predicts that India’s booming beauty business isn’t waning anytime soon.
“Digital acceleration brought about by Covid-19 is here to stay,” she says. “All beauty products and wellness companies are going to benefit.” Nayar will have to get used to being in the spotlight.