In the increasingly competitive field of beauty and personal care (BPC), 30-year old brand VLCC has been able to continuously hold a significant market share in the BPC segment. With 216 beauty clinics across 10 countries, it is one of the top players in the industry. The company is now set to open IPO by the end of this quarter.
For IPO, the company is going to offer two components: primary – the fresh issue of Rs 300 crore and secondary – sale of shares by existing shareholders comprising 23.69 percent of the pre-issue paid-up capital. The issue size will depend on the pricing of the shares being issued and will be decided closer to the date of the issue.
As of March 31, 2021, VLCC serves customers across 310 locations in 143 cities and across 12 countries in South Asia, South East Asia, the Gulf Cooperation Council Region (“GCC Region”), and East Africa. The company had a total income of Rs. 5,652.42 million and profit/(loss) for the year after tax of Rs. 62.42 million, with an EBITDA of Rs. 1,501.19 million in Fiscal 2021.
Core Business Model
Founded by Vandana Luthra as a beauty and weight management services center in 1989, incorporated in 1996, the company presently has three verticals as their core businesses: a) VLCC Wellness & Beauty Clinics (‘Wellness Clinics”), b) Personal Care Products, and c) VLCC Institutes of Beauty & Nutrition.
The total revenue of our Wellness Clinics business has been Rs. 5,441.63 million in fiscal 2019, Rs. 4,806.25 million in fiscal 2020 and Rs. 3,416.29 million in fiscal 2021. The total revenue from the products business has been Rs. 2,499.53 million in fiscal 2019, Rs. 2,269.71 million in fiscal 2020 and Rs. 1,825.39 million in fiscal 2021.
The company has grown the retail reach for their personal care products business in India in the general trade and modern trade channels through a weighted distribution strategy to cover over 110,000 stores. As for the institutes, between fiscal 2019 to fiscal 2021, the company trained ~10,000 students annually on an average at their Institutes as well as through participation in the Government of India’s 'Skill India Mission'.
“Due to Covid-19 pandemic, unfortunately, lots of small unorganized sector businesses in the wellness services and skills domain have shut or are shutting their operations. The wellness and beauty industry is getting consolidated and becoming more organized than ever before,” said Mukesh Luthra, Chairman, VLCC Health Care.
“For organized players like VLCC, there exists clear opportunity to get multi-fold new customers making business even more predictable,” he added.
In fact, another famous beauty brand Nykaa has announced its IPO too in October 2021. A proper analysis is needed to understand what is contributing to the growth in the beauty industry.
Understanding Beauty Industry
Globally, the beauty industry amounts to $511 billion and is set to reach $716.6 billion by 2025. The US and Canada are the largest markets at $62.46 billion and $69.4 billion. The Indian beauty industry, which has been growing rapidly in the last couple of years, maybe catch up, with currently at around $10 billion in 2021, expected to reach $30 billion by 2025.
The top players in India’s BPC market which also have an international presence are Hindustan Unilever, L'Oréal India, and Colgate-Palmolive India, together capturing 38 percent of the market. Dabur India, Marico, Godrej Consumer Products, Emami and Patanjali Ayurved, etc. are top domestic players enjoying a strong presence in the Indian market. Many beauty start-ups are also expected to enter the market. Several prominent international players Gillette India, Johnson & Johnson (India), Reckitt Benckiser (India), and Procter & Gamble have also found their own customer base in the Indian market. Despite the saturation, the market still shows strong potential for further growth. The question arises of how this potential will be exploited.
One of the factors, for instance, that is driving the growth, particularly in the rural markets, is growing consciousness about grooming and increased brand awareness. Even though the conversions through e-commerce channels have been low, because of increased awareness through social media the rural consumers have started mirroring urban aspirations and lifestyles.
In the urban space, we have seen the growth of specialist channels such as chemists, beauty stores, modern trade that are adding to the buzz in the beauty sector. Such experience outlets which provide an uncluttered product spread in a clean environment are only going to grow in the next few years.
Scope In The E-commerce
Even though the sale of beauty products still majorly happens through retail channels, e-commerce holds a lot of opportunities. The success of the brands like Nykaa and Purplle is indicative of the same.
VLCC over the last several years has successfully extended the brand from just a services company to a services and products brand in the overall wellness & beauty domain and is currently working towards making the transition from a brick-and-mortar to an omnichannel presence.
VLCC products through e-commerce channels have increased from 6.4 percent to 9.6 percent to 26.4 percent of the total product sales in India between fiscal 2019, fiscal 2020, and fiscal 2021, respectively. Such sales have increased by 129.1 percent, from Rs 167.44 million in fiscal 2020 to Rs 383.59 million in fiscal 2021.
Luthra stated, “We plan to differentiate ourselves by being solutions and experience provider of packages of products and services that fully address the customer’s everyday health, wellness and beauty needs, through this omnichannel approach which would encompass both brick-and-mortar operations as well as a significant digital and online presence for our wellness services, personal care products, and skill development offerings.”
The company has launched a mobile app for wellness & beauty services, through which the company is working towards tracking the customer’s case history on diagnosis, clinical data, fitness data, health risk assessment, with artificial intelligence to provide insights like behavioral health risks monitoring customer progress. The VLCC also has a skill development mobile app that was launched recently and is in the process of up-gradation will ensure that we digitize the end-to-end learning process for the students.
Given the growth in the beauty industry, with top players like VLCC and Nykaa opening their IPOs, major developments are expected in the days ahead.