With backing from KKR’s Henry Kravis, Falguni Nayar has become India’s richest self-made woman thanks to her fast-growing fashion and beauty retailer.
India’s richest self-made woman – Falguni Nayar, who founded Mumbai-based beauty and fashion retailer Nykaa – has advice for women entrepreneurs: “Let the spotlight of your life be on you.”
That resonates with her own journey to creating the $11 billion (market cap) Nykaa – derived from the Sanskrit word “Nayaka,” meaning one who’s in the spotlight.
Nayar was an investment banker for 19 years with India’s premier Kotak Mahindra Bank. During those two decades, she worked closely with India’s business elite including her boss, Uday Kotak, the well-respected billionaire founder of her firm. As managing director of its subsidiary Kotak Investment Banking, she held the hands of dozens of Indian entrepreneurs – including now billionaire Harsh Mariwala of consumer goods firm Marico and Ajay Bijli of PVR Cinemas – and helped them take their companies public.
Then one year shy of her 50th birthday, she quit to start her own business.
“You have to be the chief actor in your life,” says Nayar, who founded beauty and fashion retailer Nykaa in Mumbai in 2012. She invested $2 million in the initial years, along with her husband, Sanjay Nayar, the India CEO of U.S. private equity giant KKR. (The couple were in the same study group at the prestigious Indian Institute of Management in Ahmedabad).
One of her earliest believers was KKR’s billionaire cofounder Henry Kravis. “He was a big supporter from day one,” says Nayar. “He encouraged me to start my entrepreneurial journey. He wanted to take a stake in the first fundraising round, but I wanted to keep it to domestic investors.” Kravis eventually bought a stake from another investor who was selling; his Kravis Investment Partners LLC owns a 1.1% slice of the company.
It’s been quite a successful journey so far. Nykaa, which sells 4,000 brands, from sprays to skin creams to skirts, all available online and through 102 stores across 45 Indian cities, first became profitable in the fiscal year ending March 2021. Eight months later, Nykaa went public, one of the rare start-ups to turn a profit before the IPO. That helps explain why the November listing was such a smash success: the $13 billion IPO was oversubscribed 82 times. Even though the stock’s taken a beating since then, Nayar is still worth $5.9 billion, thanks to the 53% stake that she shares with her husband and 31-year-old twins, Anchit and Adwaita, who run Nykaa’s online and fashion businesses.
Nayar grew up in Mumbai. Her father–who moved from Karachi as a teenager during the partition of India and Pakistan by the British colonizers–started as a Sanskrit teacher in Mumbai and eventually cofounded a ball-bearings business.
Nayar recalls that she and her younger brother were both encouraged to help with the business.
“He’d expect us to roll up our sleeves and pitch in – even if it meant packing large orders,” she says. “My father was a different thinker. He’d treat me and my brother equally. Growing up I always felt like I could take risks – because I saw him taking risks.”
Her father often challenged her to pick stocks and study the price to earnings ratios of publicly-traded companies- even when she was in high school. She then went on to do her undergraduate degree in commerce from Sydenham College in Mumbai and got a post-graduate diploma in management at IIM, Ahmedabad.
Her first job, at age 22, was working as a management consultant at accounting firm A.F. Ferguson. She then moved to Kotak Investment Banking, where she worked in institutional equities and investment banking, establishing Kotak’s securities operations in the U.S. and U.K.
“Nykaa will be ten in April, and we are feeling a coming-of-age kind of excitement as a company.”
The seeds for her entrepreneurial venture were planted between 2008 and 2012, when her twins were in college in the U.S. at Columbia and Yale. While visiting them, she became a loyal customer of Sephora, particularly because Sephora staff helped her figure out what products were right for her instead of trying to hard-sell products she never needed.
She felt that India was ready for a Sephora. Around this time, she was also raring to start out on her own. From 2009 to 2011, she considered ideas in healthcare (nursing home management) and hospitality (long-term, luxury home-stays) before zeroing in on beauty and cosmetics.
But she realized that she’d have to literally create the online beauty market in India from scratch. Nayar was up for the challenge, despite her lack of experience in beauty, tech or retailing. Her promise was to curate an array of authentic beauty products for an Indian audience that didn’t have access to international brands. But the initial months were tough. She kept a tight lid on costs – working out of her dad’s office in an industrial area.
Nykaa’s orders burgeoned in the initial months, but the back-end wasn’t robust enough to handle the volume. Three chief technology officers quit in the first four years and she had to rely on the internal tech team to keep things afloat.
Her connections in the investment world helped her get a foot in the door, but she still had to work to raise money. Today, a clutch of billionaires own a piece of Nykaa – including Hong Kong commodities billionaire Harry Banga and Rishabh Mariwala, son of Indian consumer goods billionaire Harsh Mariwala. Large institutional investors TPG, Fidelity and the U.K.’s Steadview Capital Management also hold stakes.
When Nayar first veered from banking to beauty, she created an online cosmetics business with endless virtual “aisles” featuring international brands like Bobbi Brown and Charlotte Tilbury. Two years later, she opened the first Nykaa store in Delhi.
The next year she rolled out in-house cosmetics brands for highlighters, foundations, nail enamels and the like –contracting with manufacturers in India and sometimes pricing the Nykaa brands less than the foreign imports.
By 2018 she had moved into apparel through Nykaa Fashion. Today Nykaa also sells men’s grooming products (like beard oil and colognes) and home furnishings, and has a B2B business selling to retailers. Analysts say that Nykaa stays relevant by constantly adding more brands.
“We are working with brands to make luxury more affordable to Indian customers,” says Nayar. “We want to put the power of choice in the hands of consumers.”
For instance, Estee Lauder offers mini lipsticks and 7 milliliter advanced night serum packs (versus the standard 20 milliliter packs) through Nykaa to win over cost-conscious buyers. “We are very big on ‘try and buy’ and we encourage brands to invest in the youth of India,” she says.
In the first nine months of fiscal 2022 ended December 31, 2021, Nykaa reported nearly one billion visits to its websites and mobile apps for beauty and fashion – up 78% from the same period in the prior year. It also processed more than 23 million orders in that period – up 80%.
“Consumption is back to normal levels,” says Nayar, who notes that even during the pandemic, while sales of products like lipstick suffered, eye, skin and hair care products did well. “We are pushing the pedal on customer acquisition.”
Grabbing those customers isn’t cheap: while revenues rose 65% to $377 million for the first nine months of fiscal 2022, profits fell 23% to $4.5 million due to an increase in spending on marketing.
Nayar notes that both its key markets – beauty and fashion – are poised to grow. “Fashion was a big focus during the pandemic,” says Nayar. “When physical stores were shut, a lot of fashion in India came online. Nykaa benefited a lot from online fashion purchases.”
Nykaa Fashion, which ranges from footwear to loungewear to western wear, is also constantly adding new names – like Scandinavian brand NA-KD, known for its tops, dresses and bikinis, and sleepwear brand Masaba for Nykd, launched in collaboration with Indian celebrity designer Masaba Gupta.
“Fashion is an even bigger business than beauty,” says Nayar. “In fashion, even if we get a small market share it’ll be a larger business.”
But analysts point out that it’s a tougher market to crack.
“Fashion is a very well-served category and it’s difficult to make money in,” says Arvind Singhal, chairman and managing director of consulting firm Technopak in Gurgaon, India. “It’s an extremely competitive space with established players like Myntra and big players like Tata and Reliance. And in the case of unlisted fashion players like Reliance or Fab India, they don’t even have the pressure of quarterly scrutiny.”
Nayar, who’s busy using the $85 million from the fresh issue of shares during the IPO to open up new warehouses and stores, is looking far ahead. “We are building a business for the long term,” says Nayar, “Nykaa will be ten in April, and we are feeling a coming-of-age kind of excitement as a company. ”
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