FSN E–Commerce Ventures Limited - IPO Note

Internet & Catalogue Retail

FSN E–Commerce Ventures Limited - IPO Note

Internet & Catalogue Retail

Price range
Rs. 1085 - 1125
Issue Period:
Oct 28, 2021
Nov 01, 2021
October 28, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 5350 cr.
Public Issue
47,575,326 cr. shares
Market cap post IPO
53,204 cr.
Equity Pre - IPO
46.70 cr.
Equity Post - IPO
47.29 cr.
Issue type
Fresh Issue & OFS

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Strong Growth Potential

Preferred destination for luxury and prestige products in India:
A large number of leading luxury and prestige BPC and fashion brands retail with the company, making it the shopping destination of choice in India for their products.

Nykaa has built specific capabilities across marketing, technology, supply chain, fulfilment, and consumer service to create a differentiated omni-channel ecosystem for such brands and consumers.

As a result of these bespoke services, many global luxury brands such as Charlotte Tilbury, Huda Beauty, Mario Badescu, Pixi, and Tangle Teezer, have chosen it to import, launch and sell their products to consumers in India.

In fashion business, they also enable customization for luxury and made-to-order products. Consumers can work with stylists to identify their customization requirements and it works with the brands to deliver such customized products.

Proprietary technology stack
Nykaa’s platform architecture comprises of simple, small, maintainable, scalable building blocks following the principles of service oriented architecture.

This has enabled it to support multiple business models, execute new initiatives and make operational efficiency gains across offerings, new and existing.

Data analytics capabilities powered by scalable data engineering allows consumption of millions of data points across consumer interactions, product attributes, consumer demographics, marketing campaigns, inventory and pricing.

In-house data team is able to leverage this information to create dynamic hyper-personalized experiences for consumers across their journey on the platform.

Founder-led company supported by a professional management team
Company is led by Founder, Executive Chairperson, Managing Director and Chief Executive Officer, Falguni Nayar, who started the business in 2012, driven by a desire to transform the traditional and transactional ways of lifestyle e-commerce in India.

Her understanding of the consumer, intuitive entrepreneurship and involvement in key aspects of business has helped accelerate and drive profitable growth.

Falguni is complemented by a professional management team which shares the same vision and values as hers to drive growth

Resilient, capital efficient business with a combination of strong growth and profitability
Nykaa has focused on capital efficiency and unit economics, while simultaneously building for scale and growth.

It has been able to achieve scale with only Rs. 5,777.38 Mn primary investment into the Company as of March 31, 2021.

In the Financial Year 2021

  • Gross Merchandise Value was ₹40,459.8 million with revenue from operations of ₹24,408.96 million and a 6.61% EBITDA margin.
  • Revenue from operations grew 38.10% in the Financial Year 2021 as compared to the Financial Year 2020, despite the adverse impact of COVID-19 on its business.
  • Restated profit for the year in the Financial Year 2021 was ₹619.45 million, as compared to a restated loss of ₹163.40 million for the Financial Year 2020.

For the three months ended June 30, 2021

  • Gross Merchandise Value (GMV) was ₹14,696.1 million with revenue from operations of ₹8,169.91 million and a 3.30% EBITDA margin.
  • Revenue from operations grew 183.05% for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.
  • Restated profit for the three months ended June 30, 2021 was ₹35.22 million, as compared to a restated loss of ₹545.07 million for the three months ended June 30, 2020.

Capital turnover ratio has improved from 3.1 times in the Financial Year 2019 to 4.2 times in the Financial Year 2021.


  • They may not be able to boost revenue if they are unable to attract new customers or do it in a cost-effective manner.
  • Any damage to their brand or reputation could have a negative impact on their business.
  • The sale of their own items exposes them to new risks and increases the severity of others.
  • They operate in an extremely competitive sector, and their inability to compete successfully could affect their bottom line.
  • Their business’ seasonality has an impact on their quarterly performance and puts a burden on their operations.
  • The company has incurred losses in the past, which may adversely impact the company’s business and the value of the Equity Shares.

Company Description

FSN E-Commerce Ventures Limited (“Nykaa”) was incorporated on April 24, 2012. Nykaa is a native consumer technology platform, delivering a content-led, lifestyle retail experience to consumers. They have a diverse portfolio of beauty, personal care and fashion products, including their owned brand products manufactured by them.

Nykaa offers consumers an Omni-channel experience with an endeavour to cater to the consumers’ preferences and convenience:

Online: Company’s online channels include mobile applications, websites and mobile sites. As of August 31, 2021, they had cumulative downloads of 55.8 million across all their mobile applications and during the Financial Year 2021, 88.2% of their online GMV came through their mobile applications.

Offline: Their offline channel comprises of 80 physical stores across 40 cities in India over 3 different store formats as of August 31, 2021.

Nykaa has two business verticals:

  • Nykaa: Beauty and personal care
  • Nykaa Fashion: Apparel and accessories

As of March 31, 2021, Nykaa offered approximately 3.1 million SKUs from 4,078 national and international brands to their consumers across business verticals. For the 3 months ended June 30, 2021, the total GMV was ₹1,469.61 crore, which grew 238.8% from the 3 months ended June 30, 2020

The beauty and personal care offering is extensive with 256,149 SKUs from 2,644 brands primarily across make-up, skincare, haircare, bath and body, fragrance, grooming appliances, personal care, and health and wellness categories as of August 31, 2021.

The company manufactures owned brand beauty and personal care which are sold under their owned brands such as “Nykaa Cosmetics”, “Nykaa Naturals” and “Kay Beauty”.

Nykaa opened their first physical store in 2014, and has 80 physical stores across 40 cities as of August 31, 2021. Their physical stores currently exist in 3 formats, Nykaa Luxe, Nykaa On Trend and Nykaa Kiosks.


Nykaa redefined the art of e-retailing beauty and personal care in India. Nykaa's revenue for FY 2021 was at Rs 2,452 crore VS Rs 1,777 Cr while profit for the year in the FY 2021 was Rs 61.9 Cr, as compared to a restated loss of Rs 16.3 Cr for 2020. Q1FY22 financials also looked better than previous years, but need to see how it grows further. The beauty and personal care market have a large market opportunity especially in India where millennials are more into buying brands and look for easy buying options such as e-commerce. At the upper price band of Rs 1125, the PE works out to be 839x and the price to sales comes at 21.6x to its FY21 earnings.

Prima facie this valuation seems exorbitant. However, we believe this is a platform business with capability to leverage technology & scale multiple times. The addressable market for company’s products is very large & offers immense untapped potential. Therefore, in our view traditional methods of valuation on PE are not relevant for this company. History suggests that in the past when such businesses were listed in other global markets, they have created huge wealth for investors over next few years. Given India’s favourable population dynamics (young, upwardly mobile, high disposable income group) we believe the co has potential to generate multiple times revenues & profitability over next few years. Hence, we recommend SUBSCRIBE to the IPO for long term perspective.

Key Information

Use of Proceeds:
The offer comprises of a fresh issue and an offer for sale. Give the break-up of fresh issue & OFS to meet its requirements of funds for investment in subsidiaries (Rs. 42.00 cr.), capital expenditure (Rs. 42.00 cr.), repayment/prepayment of certain borrowings (Rs. 156.00 cr.), brand visibility and awareness (Rs. 234.00 cr.) and general corporate purpose.

Book running lead managers:
BofA Securities India Limited Citigroup Global Markets India Private Limited ICICI Securities Limited JM Financial Consultants Private Limited Kotak Mahindra Capital Company Limited Morgan Stanley India Company Pvt Ltd

Falguni Nayar is the Founder, Executive Chairperson & Managing Director and Chief Executive Officer of the company. She has over 26 years of experience in e-commerce, investment banking and broking. Prior to founding the company, she was associated with Kotak Mahindra Capital Co Ltd for 18 years where she also served as a managing director. She has also served on the boards of various companies, including Tata Motors Ltd and Aviva Life Insurance Company India Ltd. Presently, she serves as an independent on the boards of various companies including, Kotak Securities Ltd, ACC Ltd and Dabur India Ltd.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in Crores) FY19 FY20 FY21
Revenue from Operations 1111.39 1767.53 2440.86
Employee Benefit Expenses 117.30 195.61 283.65
Other Expenses 973.59 1490.87 1995.82
Total operating expenses 1090.88 1686.48 2279.47
EBITDA 20.51 81.05 161.39
EBITDA Margin (%) 1.85% 4.59% 6.61%
Depreciation and Amortization 30.88 59.51 67.13
EBIT -10.37 21.55 94.26
Other Income 4.99 10.32 11.74
Finance Cost 26.34 44.29 30.70
Profit Before Exceptional Items and Tax -31.72 -12.43 75.30
Exceptional Items
Profit Before Tax -31.72 -12.43 75.30
Tax Expenses -7.18 3.91 13.39
Effective Tax Rate (%) 22.64% -31.46% 17.79%
Profit After Tax -24.54 -16.34 61.91
PAT Margin (%) -2.21% -0.92% 2.54%
EPS -0.59 -0.39 1.39