Indian Salon Industry 2020

The 36,000 cr Indian beauty care and salon industry is largely unorganized with only around 10,000 crores (28%) forming the organized segment. But the organized segment is expected to grow at a much higher rate of 25% compared to the overall sector which is expected to grow at a rate of 12-13%.  There are more than 60 lakh salons in India with amounts to 40% of the overall beauty & wellness segment revenue. Market distribution of product sale v/s services offered within the salon industry is 57% and 43%.

With more than 1.4 billion people in India, the average per person annual spending on salons is only INR 450 (or US$6) per year compared to the global average of around US$123, US$716 in North America, US$296 in Europe, and US$66 in Asia leaving a huge potential for growth in India. 

Types of Salons

• Hair Salon: A hair salon specializes in hair care and styling, providing services such as haircuts, colors, highlights, extensions, treatments, and styling.
• Nail Salon: A nail salon provides a variety of nail care services, including manicures, pedicures, nail art, and nail extensions.
• Facial and Skin Care Salon: Beauty establishment that specializes in makeup and skin care products as well as makeup services.
• Tanning Salon:  Tanning salon offers tanning beds and other tanning services, such as spray-on tans
• Spa Salon: Spa salon offers a variety of beauty treatments, such as massages, facials, body wraps, and more.

What’s driving growth in the salon industry?

• Growing purchasing power of the Indian middle class leading to increased spending on lifestyle needs
• Favorable demographic age profile and swelling urban population
• Increasing awareness of grooming among men even though women contribute more than 85% of the industry
  • Buoyant investment landscape with world-class brands entering this segment
  • On-demand at-home service startups experiencing spectacular growth driven by the pandemic and lockdowns

What could stand in the way of this growth?

• Lack of skilled hair stylists
• High attrition rates of staff
  • Increase in low standard products
    • Insufficient regulation
• Lack of financing and bank funding
• Difficulty in scaling a non-mechanizable service

How salons are differentiating?

• Brand strengthening by offering unique propositions
• Product and service range which provide an experience rather than just a ‘haircut’
• Location and reach targeting the right spenders; malls have become a focus area
• Presence of back-end training academy to tackle shortage of skilled and trained talent
• More unisex salons to cater to the raising demand from men for grooming services

• What is the general operating model of salons?

  • In the organized salon and spa market, most players follow the franchising model, which is growing at a rate of 30%-35% annually. Additionally, players are reducing the COCO model due to huge investments in terms of time and money.

Popular Brands

Source: Company Websites, News Articles

Private Equity and Venture Capital Activity

PE players are taking special interest in this segment because of the high operating margins (around 30%) and low capital expenditure (salons operate on leased properties).

Investments are used to

• Scale up nationally
• Finance acquisitions
• Expand internationally
• Expand training centers
• Brand building

PE/VC Investment in salon businesses:

Accel & Trifecta (355cr)

WestBridge: Enrich (156cr)

JM Financial India: Enrich (50Cr)

·        VLLC: Vanity Cube Pvt Ltd (Undisclosed amount) (Acquisition)

·        Quickr: ZapLok & Poamperazi (Undisclosed amount) (Acquisition)

·        Enrich: Belita Retail Pvt Ltd (Undisclosed amount) (Acquisition)

·        Jean-Claude Biguine (JCB): The Home Salon (Undisclosed amount) (Acquisition)

·        Naturals: Natural@home - Formerly Vyomo (112.5cr – M&A)

Swastika Company Limited: Stylofie (1.8cr)

Bessemer Venture Partners: StyleGlad (undisclosed – Series A)

Info Edge (India) Ltd: BigStylist (7.5cr)

LetsVenture and Lead Angels: Belita Retail Pvt Ltd (2.8cr)

L’Occitane International SA: Sanghvi Beauty & Technologies Pvt Ltd – MyGlamm (45cr –Series A) 

Helion Venture: R&R-YLG (20Cr)

Everstone Capital: R&R-YLG (100Cr), VLCC (50Cr)

CLSA Private equity: VLCC (50Cr)

Indivision India Partners (Kishore Biyani's Future Group PE): VLCC (46Cr)

Sparrow Hill Advisory: Jawed Habib (6Cr)

Greenfield Investments: Jawed Habib (8Cr)

Typical Salon Economics

Valuation Metrics for Indian Salon Industry

Along with the two listed players in the beauty and salon space, Jawed Habib IPO filing and VLCC fund raising are analyzed below to estimate valuation multiples. Jawed Habib's IPO was priced by adding a scarcity premium, but they finally deferred the plan to raise funds from public and dropped the IPO:

*EV: Enterprise Value (a measure of company's value) as on 1 Dec 2022

**EBITDA: Earnings Before Interest, Taxes, Depreciation & Amortization (a measure of company’s operating profitability)

Source: Jawed Habib - DRAFT RED HERRING PROSPECTUS Jan 2011, VLCC – Press Release