Nykaa NSE 0.35 per cent’s spectacular IPO on Wednesday has its investors laughing all the way to the bank, with some, including TPG Growth, earning their greatest payoff in India across any investment the private equity firm has done since opening an office in the country in 2003. According to back-of-the-envelope calculations, the company’s performance would potentially outperform some of its Silicon Valley bets, such as Uber or AirBnB.
TPG Growth is TPG’s investing arm for middle market and growth equities. TPG Growth has invested a total of Rs 191 crore in Nykaa since January 2019, at an entry price of Rs 118 per share, as part of the cosmetics e-Series tailer’s E capital round. TPG is exiting the firm in part, selling a third of its stock interests in the IPO, and has already made a cash profit of Rs 600 crore. However, at present pricing, it has Rs 2,430 crore in unrealized value on the remaining 2/3rd stake in the firm, resulting in an 18.6 times return (multiple of money or MoM, in PE jargon, speak).
Nykaa, an Indian cosmetics firm, has raised about $33 billion in its initial public offering (IPO)
In a country where TPG Growth has only monetised its investment in Lenskart and made 7 times more money, the Nykaa bet easily outperforms its other tech or start-up bets. Nykaa would also outperform the 6X it made when TPG Capital sold Vishal Mega Mart to Kedaara and Partners Group in 2018, a distressed retailer it turned around and cashed out of.
One of the things that drew investors like TPG and Lightspeed was Nykaa’s omnichannel approach, which combines direct to consumer web sales with a sprinkling of physical retail shops. Add in the company’s strong user involvement and well-curated product categories, and you have a recipe for market disruption and the spawning of multiple me-too businesses.
