Nykaa was built to have a life in the stock markets: Falguni Nayar

Mumbai: FSN E-Commerce Ventures, which operates India’s biggest cosmetics etailer Nykaa, hit the Indian stock exchanges on Wednesday in what was a bumper debut for the Mumbai-based firm. ‘s market cap went past Rs 1 lakh crore after the stock started trading at nearly 80% premium to its issue price of Rs 1,125.

For Nykaa’s founder and CEO Falguni Nayar, an acclaimed investment banker with Kotak Mahindra Bank who turned entrepreneur nine years ago, the listing
propelled her into the club of top billionaires with a net worth of around $6.5 billion. Nayar sat down with ET’s Sneha Shah and Samidha Sharma and spoke about how she built Nykaa differently from other tech startups. Edited excerpts:

A lot of people said the IPO pricing was way too expensive. What is your Day One reaction to the listing and the reception it has received?

The whole journey of the IPO where we met almost 120 top investors across the world, these were all high-quality, long-only investors, who asked us very tough questions. Based on that experience and the way we responded…these investors loved our story and the way we had built our business, it was a big endorsement of our strategy.

We knew we were building our business in the right manner, and it will have a long-term appeal. What is happening today is a reflection of that, it is the desire to own the stock long-term. The IPO pricing took into account investors, analysts and banks and how they thought about the valuation. Upon listing, there is a desire to hold the stock and stay on to see the strategy to unfold.

There were discussions on how Nykaa wasn’t leaving too much on the table…

No, we clearly left enough on the table, and given the nature of our company, investors will want to hold on to it long-term.

So, tell us what drove you to tap the public market?

The business and the brand should have a life of their own. We didn’t build the company to sell out so we always worked towards this — that the company when it is mature enough it should have a life in the stock markets. Even if we were to get a higher valuation in the private markets, we would have always considered a public listing. We never evaluated this versus that, India versus international. We were clear we wanted to be an Indian listed company. We are an Indian-owned, managed, built company which is why we knew we will get a lot of love here.

How do you read Nykaa’s early years? Venture investors did not take note of the company as it was so different from the typical tech startup and they now say it was a big miss.

I was looking for pure equity investment and that came more from high-networth family offices and we got enough of those. I didn’t want to raise money for the first few years as I didn’t want to show a spreadsheet and get my assumptions questioned.

Our first fundraise was in 2014 and we did meet a bunch of investors before that. But I was clear I wanted to do something which was not being done and people did not believe in. If everyone believed in it, then the idea is played out, so it was harder to sell it to investors. But we did get some investors and they have been with us since then. I think high-networth capital is good capital, they understand the risk profile, they support you on your decisions as they have done it themselves. I really value the capital we got.

But do you think there are biases in venture capital?

I didn’t raise much so I don’t have much to say. But I like pure equity bets being made rather than conditional bets where if things don’t happen then you get diluted further. I think a lot of young entrepreneurs do not understand finance and sometimes they get a term sheet which is not stacked in their favour.

You are not typically seen as being a part of the tech startup world which is reflected in the way you’ve built Nykaa…

Why think of what we are not — we are what we are. What we have leveraged very well, is the creative talent of young millennials from big cities like Mumbai and Delhi who have worked with us. They brought their own aesthetics and passion into the business. The high-quality content which drove commerce was our strength and it was unique about us. Maybe, technology was not our strength in the early years — we did a lot to get tech, slowly and steadily. Mumbai is slightly starved of tech talent, so we have built a 200-person Gurgaon tech team.

You mentioned being clear on taking on board only pure equity investors. After the listing, you have created a lot of shareholder wealth along with the family’s net worth increasing exponentially…

Neither for our investors nor for my family, I am sitting and measuring how much wealth we have created. We are only measuring how much impact we are making vis à vis our consumers and the society and that has always been our driving force.

I think in the early days also, when I used to fundraise people would say, ‘Oh! you raised so little’. That was because they wanted me to raise more money so that the transaction gets noticed. But that’s not the way to build a company. We raised capital and diluted only what was needed at that point of time. Of course, the business needed some amount of money. But we built the company with all of $80 million and these are the kind of numbers that the ecosystem you talk about wouldn’t even notice.

Talk a bit about how Nykaa promoters (you and the Nayar family) hold more than a 50% stake. Is that a deterrent when you bring professionals on board?

Professional talent is very well respected at Nykaa and they have a huge role to play — how much can we as a family do? It’s great for me that both Anchit (Nayar) and Adwaita (Nayar) are excited about the business and have chosen to join me. Family ownership brings long-term orientation to any business. There is not just ownership but also involvement.

Many of our professional team members are equally important, and many of them are very happy being a part of the journey for more than six-seven years. We see ourselves also as professional managers where we come with similar management skills as anyone else who is a professional. We don’t see that as a divide but as all of us are building the company together.

What is the next milestone for Nykaa now that you have listed?

It’s a multi-year journey and we believe that over the next five years we will continue to grow both our beauty and fashion businesses multi-fold. Similarly,
the house of brands will also continue to grow, as we become more like a consumer company which has a number of brands within its fold. We are also setting up our e-B2B (business-to-business) vertical — the Super Store where we will sell beauty to retailers. We have always believed in the whole ecosystem benefiting from what we are doing.

In India there are almost 70 unicorns, but the only one woman leading a $1-billion-plus company is you. What do you think can be done to change this glaring gender gap?

I have always said there are no glass ceilings. I don’t think men are waiting to not allow women to do what they want. I think women have to want it for themselves. And if they want it for themselves, they will have it.

Today, there is a generational shift happening. When I started, there were only nine women in a class of 150 students in our MBA school. When it came to their life journeys, a lot of women used to give up. But today’s new generation of women are not giving up. It is important to be able to juggle between personal life and work at that point of time (when you are getting married, becoming parents) because I feel you should continue working even if you take a break for some time. We see a lot of women in our offices now, Nykaa has 47% female staff. In colleges and at higher educational institutions also there are many more women now.

Also Read:
Who is Falguni Nayar, India’s richest self-made woman?