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Falguni Nayar :The Nykaa of Entrepreneurship MAY A THOUSAND "NYKAAS"

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 MAY A THOUSAND "NYKAAS" BLOOM

The Nykaa of Entrepreneurship:

Falguni Nayar shows age is just a number

Falguni Nayar, India's richest self-made woman

She exempilifies women's tech power for exponential growth

Falguni Nayar, an acclaimed investment banker with Kotak Mahindra Bank who turned
Entrepreneur at the age of 50, just nine years ago, the listing of her Company Nyakaa on the
bourses on 10 November,21 has propelled her into the club of top billionaires.

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Nayar, who owns about half of Nykaa is now worth about $6.5 billion as shares of the firm
surged as much as 89% when they started trading Wednesday.10 November,21 She’s become
India’s wealthiest self-made female billionaire, according to the Bloomberg Billionaires Index.

Synopsis

Nykaa's success should inspire many more women to shed their anxieties and embrace
entrepreneurship, powered by technology. The same success should encourage venture capital to
fund such entrepreneurs.

About Ms. Falguni Nayar and Nykaa

Falguni Nayar is the Chairperson, CEO, and MD of Nykaa, a beauty and fashion eCommerce
platform that had a blockbuster listing on the bourses on 10 November 21. The shares of her
company got listed with a massive premium of over 79 percent, against an issue price of Rs
1,125, making her net worth soar to $6.5 Billion.

Nykaa is also one of the most unique startups to hit the public markets in India- it is the only
profitable unicorn that has recently gone public, and a rare new-age firm where its promoter
group owns more than half the company.

After graduating from IIM Ahmedabad, Falguni started her career in consulting with A.F.
Ferguson & Co. She then spent 18 years at the Kotak Mahindra Bank, helming several

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businesses and was the Managing Director of Kotak Mahindra Investment Bank, and was
director at Kotak Securities – the bank’s institutional equities division.

Falguni has received many accolades throughout her career. She was awarded the ‘Woman
Ahead’ award at the Economic Times Startup Awards 2017. In the last year alone, recognising
her contribution to the Indian beauty industry, Falguni was awarded the Businesswoman of the
Year at the Economic Times Awards for Corporate Excellence 2019.
She was also listed as one of Asia's Power Businesswomen 2019 by Forbes Asia and named
Businessperson of the Year 2019 by Vogue India. Most recently, she was awarded EY
Entrepreneur of The Year 2019 – Start-up Award by Ernst and Young. She is on the board of
several companies, including ACC, Dabur, Endurance Group and Tata Technologies.

Falguni Nayar-Dare to Dream

After working for 18 years with Kotak Mahindra, Falguni Nayar left the job to pursue her own
dream.

In 2012, just a few months before turning 50 years , she founded FSN Ecommerce, which runs
the online beauty and fashion marketplace Nykaa, which sells online beauty, cosmetic ,wellness
and fashion products across websites, mobile apps and through 76 offline stores.

Nykaa sells more than 35,000 products from 850 brands , both international and Indian, luxury
and mass, and is constantly adding new labels to its stock. Last year, it brought global premium
brand Estée Lauder on board, making MAC cosmetics available online in India for the first time.

Three years ago, Nayar introduced her own brand—and it has gone on to become a best-seller.
The company’s revenue has grown 350% in the last two years. In 2016, it raised a total of Rs104
crore from investors.

According to the Company, it receives 15,000 orders a day, mostly from consumers between the
ages of 22 and 35, who have disposable income and an interest in good grooming. Another
attraction is the content—online make-up tutorials and product reviews are a great draw. The
main reason for shopping at Nykaa is accessibility.

Recent interview with Ms.Falguni Nayar

In a recent  interview after Nykaa’s blockbuster listing, Nayar spoke about how she built the
company differently from other tech startups, about it being promoter-led, what that means for
professionals in new-age companies like hers, and her next milestone after the IPO.

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Here are some edited excerpts:

Apart from the fact that this has been a stellar debut for Nykaa, this has made you the
wealthiest self-made female billionaire in India. What does wealth mean for you when you
see yourself being described this way?

Personally for me nothing much changed between 2012 when I began this business and today.
With the passion with which the entire team at Nykaa has been working, I don't see any change
based on any money tag that is put on the company. We are trying to build a fantastic brand that
lives in the minds of consumers for a very long time and build a business that is very sustainable.
I think those are the motivations that the firm and I have rather than any price tag we may carry.

Nykaa is valued 1,600 times P/E and even if it grows 10X from here, it will be valued at 160
times earnings which makes it very expensive. Do you feel the pressure to justify these
valuations, the demand that it has seen from investors?

Industries like ours- beauty and fashion commerce are in very early stages of development and
that leaves a lot of room for growth from here. And, investors assume that, as sales grow,
profitability will grow multifold because of economies of scale. This is what investors may be
assuming. They may assume that profitability that is small at the moment can change very
dramatically as one moves forward.

Are you confident that Nykaa can do what it did in the Beauty and Personal Care (BPC)
Space in the other segments that you are betting on? From fashion to men's grooming to
mother and children's products. How are you going to replicate what you did in BPC? BPC
also worked for you because you have an inventory-led model with complete control over
the quality of products, with better margins.

We introduced fashion 2.5 years ago and it has been scaling up very rapidly. We are building
fashion very differently than what has existed in the market. We wanted to bring products and
brands which were high on-trend and fashion and premium than what was available because we
believe Indian consumers wanted more on premium quality products and that has been validated.
Fashion now accounts for almost 25 percent of our GMV (gross merchandise value).

We are also doing fashion business in a very prudent manner with a reasonable margin structure.
We do fashion in a marketplace manner and what we book is only the commission and take rate
as they call it. The comparison of net revenue in both categories (BPC & Fashion) is not the
same but the inherent profitability and unit economics of both businesses are similar. That is
what we are focussing on. To deliver additional categories. We do a very vertical focussed
execution, where the discovery will be very unique and is why the consumer loves our platforms.

How are you going to balance expectations of profitability from the public markets with
the need to invest and grow some of these newer categories?

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Customer acquisition is very critical to companies like ourselves where the penetration is
currently very low and over time we can have a lot more customers. As Nykaa continues on its
customer acquisition journey, we are going to make sure that we do it in a measured manner that
is justified by our size and scale of operations. I think Nykaa has been very patient in that even in
the past. We are keen on building platforms but we will do it at a pace that makes sense. We are
not saying we will choose growth versus profitability but we will try to achieve both.

Traditionally for Nykaa, the October-December and the January-March quarters are
strong. Are you benefiting from the revenge shopping, revenge travel that seems to be
playing out?

We have seen a huge uptick in demand from the start of the festive season and we think it will
sustain throughout this busy season which starts from festive and continues into the wedding
season. We have seen in many years of our operations that our second half is much stronger than
the first half in terms of the amount of business. That leads to better profitability. We end up
making front-ended investments in marketing and creating warehouse capacity and a lot of that
benefits us in the second half.

You started up at the age of 50, which was really going against the grain because it is
perceived that one has a higher risk appetite and resilience to bounce back when they are
much younger. What worked for you? Or did it help that you already established your
street cred so you could plunge headlong and take those risks and recover if it did not work
out?

As I think back, many years of working as a professional taught me a lot of things that may have
come in handy in this leg of my journey. I always wanted to become an entrepreneur and I felt
that I had more time and the ability to commit myself at a certain age and point in my life.
Around 2009 is when I started itching to want to do more and Nykaa germinated out of that. I am
glad that I did it. What it shows is that - whether gender, age, background, and education- none
of that is a bar and you can do what you set your mind to do.

Does it help for women to start up late? They are done with all their other responsibilities
and can focus on their venture?

To be honest, in my case, I did think like that. But, sometimes, I feel women put constraints in
their minds which are not so necessary. Today, many women are managing their businesses cum
young children. I don't think there is one playbook. I did it when I did it, and I am glad that I at
least tried it when I tried it.

Any words of advice from Uday Kotak, on running a publicly-listed company?

I didn't really ask him. But, from watching him through many years that I worked for him, there
are a couple of things that I learned from him. One, corporate governance remains important.
The second is: don't do anything which is financially not sustainable. So the right unit economics
and the right financial incentives for consumers to buy on your website. You shouldn't provide
wrong incentives for consumers to buy on your website because that is not sustainable.

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So many of these things I do believe I learned from him. I used to joke about it that if I do
something wrong, like free shipping at any level, that is something that Uday would not approve
of. So there are many lessons that stayed in my mind on whether I would or would not do
something.

You also maintain a very low profile on social media. There is just one tweet from you in
the last nine years. Has that helped in a sense, to just be able to put your head down and
build, instead of getting distracted?

I don't know. I think there is enough to gain on social media also. I am who I am and I can't
change myself. I think being active on social media has a huge amount of time and effort. And I
am someone who spends my time a little differently. Numbers really motivate me and if I am
sitting in front of a spreadsheet I spend a lot of time on it. I think it is what you like and it is
always important to do what you love and I am glad that I can do that. But I think the firm does
social media and it is a very important pillar of our strategy. So I believe in social media, it is just
that I can't keep up with it.

Give us a sense of what you felt today when you finally saw your baby (Nykaa) become a
publicly-listed company. You don't wear your emotions on your sleeve, so tell us what you
were going through.

I have to say that yes, I don't like to show my emotions outwardly. But today is a very important
day where I feel an emotion that was quite strong. I felt pride in building a company that is so
well appreciated by investors who really understand this business and their endorsement has
meant a lot for me. Today was a culmination of that journey- through the hundreds of meetings
we did with foreign investors and all the questions they asked.

All of that has been a very rewarding experience that has culminated into a very strong listing. I
definitely feel elated and very happy and proud of my team which includes my children and the
entire management team of Nykaa who have worked so hard to create and build a brand that we
wish lives in the heart of Indian consumers for a very long time.

Has control always been very important to you? You still own a significant stake in the
company post listing, whereas we typically see the founders getting diluted with every
round.

I don't think I built it with a view to be at any percentage of shareholding. I wanted to build with
a lot of financial prudence and only dilute what is necessary.

What would your message be for entrepreneurs who want to create their own Nykaa
someday?

Any entrepreneurship needs a lot of passion, hard work, conviction, and time. When I started, if I
thought I would be here in three years or five years, it wouldn't happen. It needs long innings.

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Somehow, I was very clear that I would need 10 years plus, and that is why I started before I
turned 50. My suggestion to entrepreneurs is to choose what you love because you will have to
do it with a lot of intensity, commitment, passion, and hard work for a pretty long time for it to
reach the finishing line.

Some more information on the Nykaa, Falguni Nayar, India's richest self-made woman

Falguni Nayar on the 17th on India’s rich list: FSN’s (Nykaa's promoter company) share price is
now Rs 2,206, giving it a market cap of about Rs 1.03 lakh crore ($13.99 billion) and
making Nayar the 17th. richest person in India with a fortune of around Rs 55,572 crore ($7.48
billion).

She is also only the second Indian self-made woman billionaire after Biocon founder Kiran
Mazumdar-Shaw. Nayar owns 53.5% of FSN through two promoter trusts and seven other
promoter entities.

Nykaa in heady company: Nykaa’s $13.99 billion market cap, meanwhile, made it the 51st
largest company in India, according to data from Companymarketcap.com. The online cosmetics
retailer was ahead of heavyweights such as Coal India ($13.89 billion), Godrej ($13.64 billion),
Hindalco Industries ($13.60 billion) and Bharat Petroleum ($12.70 billion). Zomato, the first
Indian startup to go public, was four places higher at 47, with a market cap of $14.58 billion.

May a thousand Nykaas bloom

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