Nykaa, Falguni Nayar, IPO: Entrepreneur At 49, Billionaire At 58: How Falguni Nayar Constructed Success With Nykaa



Entrepreneurship is an journey that wants braveness. Age and expertise will not be liabilities: Falguni Nayar, government chairperson, managing director and CEO, Nykaa
Picture: Mexy Xavier

The Nykaa headquarters on the fourth flooring of Cynergy IT Park in Mumbai’s Prabhadevi is filled with vivacious faces on a Thursday morning. I stroll in and examine my watch—it’s only 9.30 am. Whereas the collaborative open areas, glass partitions, stand-sit desks are all textbook ‘startup workplace’, there’s something that stands out. A majority of Nykaa’s staffers are younger girls, dressed as much as the nines with flawless make-up, shirts tucked into A-line skirts or high-waisted pants to go together with excessive heels. Main the pack is funding banker-turned-entrepreneur and now India’s second feminine self-made billionaire Falguni Nayar. The clicking-clack of the excessive heels echoes, as these younger faces stroll, relatively, bolt previous one another, with cups of espresso. All the flooring is oozing with vitality, due to the Pink Friday Sale. The IPO buzz can be inevitably within the air. For somebody who has been working from house for the previous year-and-a-half, watching these heads buried into laptops on their desks and listening to the fixed chatter got here as a breath of contemporary air.Look out for extra tales on entrepreneurs and their ‘Roaring 50s’ in our new particular, releasing on sixth December, MondayAs I stroll into Nayar’s cabin, her eyes are fastened on the laptop computer display screen as she displays Nykaa’s statistics. She greets me after which her eyes return to the display screen, even for the minute I take to calm down. I’m instantly reminded of what her son Anchit, chairman and CEO of magnificence ecommerce, informed me a day earlier, “FN [Nayar] is extraordinarily hardworking and barely sleeps. She sends emails at 4 am.”

The sample follows all through our 45-minute dialog; it’s virtually as if her eyes are craving to get again to work. Clearly, Nykaa [meaning ‘heroine’ in Sanskrit] is her ardour and the enthusiastic workforce is proof that she leads by instance.

Nayar then turns the display screen towards me and says, “See, I’m simply trying on the funnel chart, the place we monitor distinctive buyer visits. It’s an artwork to transform them to paying clients… it isn’t a easy button that you simply press, and clients aa jaate hai (folks will come to you).” The higher funnel contains clients who go to the web site, however might or might not have an intention to purchase; the center funnel contains repeat guests, however not paying clients; the underside is the place they could have added to the cart, however are ready for a possibility to purchase. “Since day one, I’ve been trying on the statistics,” she says, including that it’s one thing she picked up as an funding banker. “That’s the secret sauce.” 

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa Nayar, 58, has been the discuss of city because the firm’s blockbuster preliminary public providing (IPO) on November 10. The ₹5,352-crore IPO of Nayar’s FSN E-Commerce Ventures Ltd was oversubscribed almost 82.5 occasions. On the identical day, the corporate’s market capitalisation touched the ₹1 lakh crore mark. Nayar, who owns 52.56 % stake within the firm, grew to become India’s richest self-made lady billionaire, with a internet price of $7.03billion (₹52,794 crore) as of November 26, in accordance with the Bloomberg Billionaires Index.

Modest to a fault regardless of the blockbluster itemizing, Nayar says there was no excessive level in her profession. “I don’t suppose I’ve one,” she says. Not even the IPO? Nayar admits it’s a “large milestone”. “Throughout our roadshow, we met some international buyers who’re referred to as ‘Champions of Investing’ and run large tech funds. They gave consideration to our enterprise mannequin, understood it, requested some robust questions and informed us that we now have one thing distinctive and b­uilt the proper enterprise. That gave me lots of satisfaction. So, in case you think about {that a} excessive level…”

It was round 2009 that Nayar, then managing director at Kotak Mahindra Capital, began contemplating a second innings as an entrepreneur. By 2011, she had a few concepts, one in all them was being a multi-brand retailer within the magnificence phase. She was 49 when give up her job in March 2012 and launched Nykaa.

On April 1, Nayar began engaged on Nykaa and by April 21, she registered her firm FSN E-Commerce Ventures Personal Ltd. By Could 1, she had three workers. She began out of her father’s small workplace—which may seat 10-15 folks—at Vasan Udyog Bhavan in Decrease Parel, Mumbai. Nykaa’s web site went reside on October 1. “I typically joke,” says Nayar, “that it was like taking a bride to the mandap when she was not prepared. The web site was totally operational by January 2013.”

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with NykaaIt was across the identical time that her daughter Adwaita began serving to at Nykaa. “After I graduated, I spent a while with mother in India, serving to her determine what the wireframes would appear to be from my bed room. However like Indian mom, she stated you need to go work within the US for a bit,” recollects Adwaita. In a few months, she give up her job at Bain & Firm as an related guide, and got here again to Nykaa.

Adwaita admits the early days have been difficult. “Our founding workforce give up inside a 12 months of launch. The web site would hold crashing. Our CTOs saved quitting. We had no enterprise useful resource planning (ERP) system in place, which meant that the minute we hit 100 orders, the entire system crumbled. Mother and I might be on the warehouse packing packing containers,” she recollects. As soon as they began investing in advertising, by August 2013, round Raksha Bandhan, demand picked up. They began getting 60-65 orders a day. When Nykaa participated within the second version of the Google On-line Purchasing Competition in December that 12 months, that quantity shot as much as roughly 1,000 orders a day.

 “Again then, I used to be so younger… I realised entrepreneurship is so laborious and such a roller-coaster—there are such a lot of highs and lows. Significantly the lows… it was laborious for me to be thick-skinned,” says Adwaita, who spent about two-and-a-half years at Nykaa earlier than pursuing her MBA at Harvard Enterprise College. Two years later, in 2017, she rejoined Nykaa as head of retail enterprise. 

Such an extended journey

Nayar was one of many few ‘skilled entrepreneurs’ at Kotak, as she took up roles that included organising workplaces in new places, together with New York and London. “At Kotak, we have been inspired to do new issues. The financial institution was pretty small then, so a bunch of us received to take up entrepreneurial roles, the place the trail of how it’s a must to do issues will not be properly laid out… you will have study to seek out revolutionary options,” she says.

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa

It helped Nayar perceive that return on fairness and long-term sustainability of the enterprise matter, which is what she tried to implement at Nykaa. “As an funding banker, I’ve seen firms go up and down. Solely firms that create long-term sustainable worth for shareholders, clients and everybody within the ecosystem survive and thrive.”

The funding banker in her was conscious that elevating capital instantly would result in questions similar to: ‘Why do you suppose you’re going to get this margin?’ and ‘How will you purchase clients at this value?’ “I didn’t wish to be questioned on assumptions. I selected to make it [the business model] work and solely then increase capital,” she says.

A few of Nykaa’s early buyers included Smita Parekh, spouse of HDFC Ltd Chairman Deepak Parekh; company lawyer Zia Mody of AZB; Hong Kong-based billionaire Harindarpal Banga of Caravel Group and Sharrp Ventures, which manages the Mariwala Household Workplace.

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa

Rishabh Mariwala, managing associate at Sharrp Ventures, says, “Nykaa had proven some traction on {the marketplace} vertical. Its give attention to being aware about prices and protecting burn underneath management have been obvious. The guess, nonetheless, was on Falguni. She had stepped apart from a really profitable profession as a banker to fulfil an entrepreneurial dream and create a legacy.”

He strongly believes that Nayar is a risk-taker. “With out taking moderately excessive danger, it’s unimaginable to construct the enterprise that she has. It isn’t merely about diving into excessive danger initiatives. It’s about making a correct evaluation, experimenting, and having a danger mitigation plan,” he explains. A few of Nayar’s largest bets have been on folks. Her preliminary prime administration comprised members who weren’t from the sweetness and private care trade, “Typically it’s a must to give folks an opportunity. I guess on myself and everybody,” says Nayar.

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa

Off-the-beaten path

Within the first 5 years of Nykaa’s journey, folks would ask Nayar, “How will you Amazon-proof your corporation… with Amazon coming in, giving reductions and killing your corporation?” These questions are requested even immediately. However Nayar was clear from day one which she wished to do the ‘proper enterprise’. “We didn’t have an ambition that was pushed by a necessity for a sure GMV (gross merchandise worth) or valuation,” she explains. “We wished blissful clients. So, we went down that path.”Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa

There have been sure developments and fashions that Nayar selected to not comply with. One among them being an inventory-based mannequin over a market, one thing most ecommerce gamers comply with.

Adwaita says the workforce was clear from the start that magnificence needed to be run as an inventory-based mannequin. “Magnificence has lots of selection, and clients know precisely what they need. One of many ache factors available in the market was that they wished shade XYZ, but it surely was by no means accessible. We felt the way in which to ship on availability was by holding inventory,” she says. One more reason was that they’ll have superior supply timelines and buyer expertise.

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with NykaaThe second was the idea of brand-funded gross sales. “We respect the manufacturers that our companions are constructing. Quite a lot of horizontal platforms wish to purchase clients and therefore they low cost or they see model reductions as a method to construct GMV. We didn’t take a look at it that manner,” says Nayar. The technique at Nykaa was that if manufacturers want to low cost, they cross it on to customers. Some luxurious manufacturers don’t do this and as a substitute supply free merchandise. 

One other widespread development they didn’t comply with was the ‘magnificence field’—an idea that was turning into widespread not solely in India, but additionally the US. Clients subscribe to those, and each month, the corporate sends 4 to 5 magnificence merchandise. After sampling them, the purchasers determine to purchase it. Nykaa determined to not launch magnificence packing containers. “We made our personal selections, and did what we thought was the proper selection for us. We didn’t attempt to copy others,” says Nayar, an IIM-Ahmedabad graduate, who met her husband, KKR India CEO Sanjay Nayar, in school.
 

The corporate’s income mannequin works majorly on the margins it earns by promoting each product. “We get pleasure from about 30 to 40 % gross margins, which could be very wholesome. It’s because we give a full bouquet of companies to manufacturers. New manufacturers are launching on Nykaa for the primary time, since they get entry to fifteen million clients from day one,” says Arvind Agarwal, group chief monetary officer, Nykaa. As soon as a model is part of the platform, full end-to-end advertising, together with digital adverts, influencer advertising, instructional content material creation, is completed by Nykaa. Primarily based on the form of deal it has with every model, Nykaa will get a margin for each product offered on the platform, which covers all prices—storage, overheads and delivery. Its order worth is sort of double that of the trade common—₹1,800-1,900 for magnificence and ₹3,200 for vogue, claims Agarwal, who has labored with ecommerce big Amazon previously.
From the early days, Nykaa has had a mixture of skilled professionals and younger workforce members. “Our era lived on social media, so we understood the facility of social media and digital. Very early on, we realised that it was working properly, and we saved following that technique,” says Adwaita, co-founder of Nykaa, and now CEO, Nykaa Trend. Educating the viewers was an essential advertising technique, which is why the corporate guess on influencer advertising. “From day one, we now have had disproportionately massive groups specializing in content material creation and training. When you begin seeing that the marginally extra sophisticated merchandise are promoting, you will have the validation that training works in pushing gross sales,” Adwaita says. 

Totally different verticals

By 2015, Nykaa launched its magnificence model, with merchandise in areas the place it noticed sure market gaps by way of worth factors. First got here nail enamels, after which some tub and physique merchandise. After launching just a few merchandise, the corporate roped in Reena Chhabra, who was COO at Colorbar, to move Nykaa’s personal label for magnificence. The corporate realised it was a specialised phase that wanted lots of consideration to element—from labelling and hues to manufacturing. Even now, manufacturing will not be outsourced fully. “The packaging comes from someplace, interior packaging from elsewhere, the fragrance from France or Switzerland, caps and bottle from someplace. It’s fairly a sophisticated provide chain in placing these merchandise collectively,” Nayar explains.

Launching Nykaa’s personal label was a danger too, says Mariwala. “New manufacturers wouldn’t have very excessive success charges. Nevertheless, her technique with the personal label vertical was to enhance margins,” he says. After nail enamels, lipsticks, kajal sticks and physique mists in magnificence, Nayar in 2017 took the plunge into a brand new phase: Trend.

“Mother typically involves me with a glint in her eyes, saying, ‘Allow us to take a look at a brand new enterprise’. It occurs on a regular basis… she is a large risk-taker, all the time dreaming up new companies. On the opposite facet, I’m like, ‘Are we prepared? Can we actually do it?’,” says Adwaita. This occurred first after they moved from on-line magnificence to offline retail shops after which with vogue. She laughs, “I’m simply put on the finish of beginning new issues.”

Nayar was positive of getting into the style market provided that the estimated measurement of the trade was 5-6x the dimensions of the sweetness trade. In keeping with Statista, the Indian vogue trade is anticipated to point out compound annual development price (CAGR) of 10.14 %, leading to a projected market quantity of $25,743 million (approx ₹1.93 lakh crore) by 2025.  
 
“She has an uncanny knack of recognising that these are massive alternatives. So I didn’t push again an excessive amount of,” says Adwaita. Two-and-a-half years later, vogue’s GMV grew by 256 % year-on-year (YoY) to succeed in ₹665.6 crore in FY21. Its annual distinctive transacting clients reached 1.3 million with YoY development of 417 % on the finish of Q2FY22. Nykaa changed into a life-style model with Nykaa Trend enterting the youngsters, males and residential segments too.

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa

At the moment, Nykaa Trend is a multi-brand platform with near 1,500 manufacturers—5 of those are its personal manufacturers, two it has acquired and three it has constructed from scratch. Nykaa Magnificence and Nykaa Trend are separate companies. “Magnificence and Trend are fully distinctive markets and we run them otherwise—magnificence is inventory-based, vogue is a market mannequin,” says Adwaita.

When Nykaa first determined to maneuver into the retail house, Adwaita travelled throughout India—from Jalandhar and Ludhiana to Chennai and Guwahati. This helped her gauge client insights, which have helped her with Nykaa Trend as properly. “The overall assumption is that the metros are the development setters,” says Adwaita. “However if you see girls wearing Guwahati, Jalandhar and Ludhiana, they put the Mumbai ladies to disgrace by way of how well-dressed and aspirational they’re.” In keeping with her, there may be not a lot distinction between Tier I and II cities. From the start, Nykaa Trend has seen equal demand from Tier I, II and III cities. 

Son steps in

After spending near seven years within the media and telecom banking, excessive yield, and equities departments at Morgan Stanley, New York, Anchit moved again to India. Round 2018, he joined Nykaa to run the retail facet of the enterprise. “I wished to assist out given how a lot the enterprise was increasing… it was an exceptional studying expertise and a once-in-a-lifetime probability to construct the enterprise,” he says.

On-line was booming, and Adwaita had simply began the offline enterprise by organising shut to twenty shops throughout India. Anchit took over the retail enterprise then, and grew it to 60-70 shops in about two years. “FN [Falguni Nayar] all the time wished us [Adwaita and me] to affix the retail enterprise first due to how difficult it’s…in case you simply do ecommerce, you don’t meet the shopper base, and our success relies upon fully on what the patron thinks,” he explains. The offline enterprise has grown to 84 bodily shops throughout 38 cities over three codecs—Nykaa Luxe, NykaaOnTrend, Nykaa Kiosk—as of September 30.

Round 2013, Nayar came upon that clients most popular an assortment of merchandise over reductions. Therefore, Nykaa made an effort to onboard varied worldwide manufacturers from Korea, Japan and so forth. “In the present day,” says Anchit, chairman and CEO, magnificence ecommerce, “there are large manufacturers like Huda Magnificence and Charlotte Tilbury promoting on Nykaa with out having a single worker in India. We handle all the things for them— from imports and pricing to storing in warehouses and advertising.” Not solely does Nykaa attain out to manufacturers to be part of the platform, however typically new manufacturers attain out to them. Earlier, it was solely the legacy manufacturers within the magnificence and private care house that individuals knew about. That has modified. “Nykaa has democratised entry not just for customers but additionally for manufacturers,” says Anchit.

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa Nykaa as a platform is majorly focussed on girls and thus got here the choice to arrange a unique platform for males: Nykaa Man. The male grooming market in India stood at $643 million (₹4,828 crore) in 2018 and is projected to develop at a CAGR of over 11 %, to cross $1.2 billion (₹9,010 crore) by 2024, in accordance with Analysis and Markets. Explains Anchit: “We created a life-style platform for males, the place they’ll store for all the things from private care and grooming to tech equipment.”

 Nykaa’s subsequent large guess is rising within the e-B2B house with its ‘Superstore’, which was launched in Q2FY22. This seems at small retailers who promote multi-brand merchandise and cope with a number of distributors. “Now all shopkeepers get entry to all manufacturers sitting on our platform at wholesale costs—the assortment they get is huge and so they can place orders on-line, based mostly on the rankings and critiques clients give,” says Anchit. As soon as shopkeepers place an order, the provision chain is taken care of by Nykaa and merchandise are delivered to them.
 
Covid-19 was an enormous studying and “taught us to be very agile”, emphasises Nayar. Round April 2020, the loss in a month was greater than the loss it had ever made in a 12 months. Nykaa took the decision to not let go of workers and moved into hyperlocal deliveries of important items.

After the preliminary setbacks, by July-September 2020, issues began trying up. Round October-December 2020, the corporate had a robust quarter, although numbers didn’t replicate the identical, due to persevering with provide chain constraints. It was round that point that Nayar and workforce determined to start out making ready for an IPO. The method took virtually a 12 months. “What was completely different for us is that FN was positive from day one which she wished to run this firm like a public firm with the proper company governance,” Anchit says.

About going for an IPO throughout a pandemic 12 months, Agarwal says, “The beauty of our IPO was that Falguni was main it from the entrance, and she or he has been an IPO banker herself. Once I joined in June 2020, she informed me that when our firm is ₹80-100 crore in PAT (revenue after tax), we should always do the IPO. Final 12 months, we grew to become PAT optimistic… so we began the method.”

Entrepreneur at 49, billionaire at 58: How Falguni Nayar built success with Nykaa

Nayar says that since Nykaa’s customers are Indian, she didn’t even think about itemizing in US or different markets. “We didn’t even see what our valuation could be there. We’re an Indian firm and from the very starting, we wished to checklist in India,” says Nayar.

The IPO was oversubscribed almost 82.5 occasions. Nykaa’s shares debuted at ₹2,001 on November 10 in opposition to the difficulty worth of ₹1,125, almost 80 % premium. “ itemizing was broadly anticipated… nonetheless, the magnitude of premium at which the itemizing befell was definitely not anticipated,” says Narendra Solanki, head-equity analysis (elementary), Anand Rathi Shares & Inventory Brokers. “We predict the corporate’s present technique is greater than adequate for mid-term development prospects which incorporates retailer enlargement, launch of recent manufacturers, rising supply effectivity and buyer fulfilment.”

Submit itemizing, nonetheless, the corporate noticed a 95 % decline in internet revenue at ₹1.2 crore for the September-ended quarter in comparison with ₹27 crore within the year-ago quarter. Nykaa attributes this to buyer acquisition prices. “It was a aware option to step up advertising to 13.5 %,” Agarwal explains. “In case you take a look at different metrics like distinctive buyer visits, magnificence has gone as much as 21 million and vogue to 16 million this quarter. Our higher funnel seems sound, and this is a chance for us to transform the visits to patrons, which is able to replicate in development sooner or later.”
Moreover, he believes the funding in constructing capacities like new warehouses, eight new bodily retailer on this quarter have additionally contributed to the drop in income. “Through the investor name, we warned our buyers of a doable loss this quarter. Nevertheless, we have been nearly worthwhile,” Agarwal provides.

Nayar explains the necessity to convert clients into patrons. “We are able to cease rising immediately if we cease spending on buying clients and switch extremely worthwhile. However we now have chosen this balanced enterprise mannequin, which to my thoughts is sustainable within the long-term,” she says.  

Nayar says she by no means realised Nykaa was the ‘subsequent large factor’ till itemizing day. “We didn’t anticipate this sort of a post-listing efficiency. I feel the buyers favored that we now have a long-term orientation,” she says. When it comes to the subsequent large milestones, she provides, “Nothing, simply hold going.”

Her critics frowned upon Nayar’s entry into the sweetness phase, taking over entrepreneurship at 49, however her grit, dedication and keenness have saved her going. “Entrepreneurship is an journey that wants braveness. Age and expertise will not be liabilities. If you find yourself younger, it’s simple as a result of there isn’t any draw back. Usually, with age, you someway put these constraints in your thoughts that you’ve sufficient to lose if you don’t succeed,” says Nayar.

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