TVS Capital to buy stake in Falguni Nayar’s Nykaa.com

TVS Capital will put in Rs25 crore of Rs60 crore series C funding in the wellness e-commerce firm
 

Falguni Nayar, founder and chief executive of Nykaa, a beauty and wellness e-commerce firm. Photo: Getty Images

Mumbai: TVS Capital Funds Ltd, the private equity and venture capital arm of TVS Group, is set to acquire a minority stake in Nykaa.com, the online beauty products retailer founded by investment-banker-turned-entrepreneur Falguni Nayar, according to two people familiar with the development.

Also participating in the Rs.60-crore Series C fundraising are a clutch of investors, including high net-worth individuals, non-resident Indians (NRIs) and family offices, the first person said.

TVS Capital will invest about Rs.25 crore, he added.

“Yes, we are nearly completing the fundraising process,” confirmed Falguni Nayar, chief executive officer, Nykaa.com, without disclosing the details of investors. “We plan to open more offline stores in various airports, such as Mumbai and Bangalore,” added Nayar.

According to Nayar, the plans include acquiring the distribution rights in India for a global beauty brand as well as launching private labels in the make-up and bath and body segments.

Nykaa opened its first offline store at Delhi airport’s Terminal 3 last year. The company claims to offer 300 brands and 15,000 products under various categories, including a selection of make-up, skincare, hair care, fragrances, bath and body and luxury products for women and men.

The stake sale was done at an enterprise value of Rs.500 crore, which is about five times more than the valuation during the last fundraising in 2014, said the second person. A TVS Capital spokesperson declined to comment on the matter.

Nayar launched Nykaa.com with her husband Sanjay Nayar, chief executive at KKR India, in 2012. They have invested $2 million in the company.

Before launching Nykaa, Falguni Nayar was managing director at Kotak Mahindra Capital Co. Ltd.

FSN E-Commerce Ventures Pvt. Ltd, which runs Nykaa.com, raised Rs.20 crore ($3.4 million) from several investors last year by selling about 20% stake.

About half of all women online shoppers buy skincare, beauty and cosmetics products, according to a report by Forrester Research Inc. and Google India last year. The number of online shoppers in India will grow three times to 100 million by 2016 from 35 million in 2014, the report had added.

“About 75-80% of the e-commerce market is held by four to five large players through horizontal model and the remaining 20-25% of the market in vertical model is held by firms in niche categories such as babycare, personal and wellness products, which also see increased interest from the investors,” said Ankur Bisen, senior vice-president (retail and consumer products) at Technopak Advisors, a consulting firm.

Nykaa.com’s nearest competitor Purplle.com had in 2011 secured an undisclosed investment by a consortium of Blume Ventures, Mumbai Angels and The Chennai Angels, and Series A fund worth $5 million from IvyCap Ventures in January.

In the online beauty products segment, Nykaa competes with firms such as Mumbai-based firms FabBag.com (formerly Vellvette.com), Beautykafe.com and Bengaluru-based VioletBag.com as well as large e-commerce firms Flipkart, Snapdeal, Myntra and Jabong.

The beauty-and-wellness industry in India will double to Rs.80,000 crore in 2017 from Rs.40,000 crore in 2014, according to a report last year by KPMG.

“The sector is thriving on the increasing section of affluent and middle-class population that has started considering beauty and wellness as a necessity,” the report added.