Listing ratifies investor ecosystem: FirstCry founder

Edited excerpts:

When do you see the business at a consolidated level turning profitable?

Across our four business segments that are India multichannel, overseas business, Globalbees (brand aggregator) and preschools, it’s a $120 billion opportunity we are chasing. So having such a large market, there will be growth levers, and which we'll talk about separately, I'll just restrict myself to profitability right now. So, on profitability, India multichannel we grew our adjusted Ebitda profitability in FY22, we were at 5.9%, we made it to 6.2% in FY23, and now, FY24, we are at 8.8%. And we have built a tremendous amount of strengths over the last 13 years, being the largest shopping destination online, with 75%, roughly of our GMV coming from online and 24-25% coming from offline.

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Our store network will grow by 350 this year, so that will continue to give us operating leverage. Plus, expanding our home brands will be a very significant part of our growth story alongwith curating 37 different third-party brands as well. Investing in our supply chain moats, and getting operating leverage out from there as well. So, all of this will continue to drive both increasing the gross margin as well as operating leverage to be able to demonstrate what we demonstrated in the past to expand our operating margins going forward.

So, the international business is where most investments will be made?

International business is the only one where we are investing because it's a slightly younger business and is front loaded. That's how you have to play that game, because it's a totally online business as well.

A lot has been spoken about the valuations. The IPOs of 2021 were criticized largely on being very aggressively priced. Was that a consideration while pricing the IPO?

I think years like 2021…those years were maybe frothy (in terms of valuations). I mean, in hindsight we can say that. But no, any price discovery, is a process, right? And the process usually is accomplished through a very standard model where our board actually appointed certain BRLMs (book running lead managers) and in the process we met 100-plus investors, domestic and foreign public market institutional investors in India and abroad. The feedback has gone back to the BRLMs and based on this feedback, they presented a certain price band to our board of directors. And that's how this price discovery has actually happened.

IPOs like FirstCry’s ratify the entire idea of India being a vibrant ecosystem that is creating wealth for investors, employees and the entrepreneuers. What are your thoughts?

It's an exciting moment for me. Young entrepreneurs get more inspired by these success stories. If I look back, from the time I graduated I always wanted to be an entrepreneur. Having built one (business) prior to this venture, I always believed that India is a land of opportunities. We have three continents inbuilt into this country already, in terms of socio economic segmentation, there's a tremendous amount of opportunity, the digital landscape of this country is very unique in the world. And that throws up a tremendous amount of opportunities.

And, and also a great ratification for venture capitalists and private equity investors, and across the world, that they can put their money to use in this country, for growing India and growing this ecosystem and taking India to the next level. India is bound to grow, but I think we can only accelerate this growth by providing new age opportunities.

What will be the growth drivers for Brainbees from here on?

If you look at our growth drivers, we will continue to invest. So, if you look at our India playbook, which is multichannel, and the same playbook will be applied internationally. Then we can come to the global market where we will invest in our brand technology and data science, to be able to get more insights about the customer preferences, and curation, also in personalization. And both, our app as well as our offline stores, will continue to grow and expand. Our offline stores, which are already 1,060 stores (as of 31 March), will grow by 350 this year.

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We will continue to grow our portfolio of home and third-party brands. Also, we will expand our supply chain which is currently around 82 warehouses through which we deliver to 47 cities on the same day, and 1,000 cities the next day. So that framework will continue to grow.

The house of brands business seems to be plateauing in the country. Most brands are struggling to grow beyond the first ₹100 crore in revenues. How differently are you building Globalbees?

We operate close to 70 brands in Globalbees and a few of them have crossed ₹100 crore revenues. The business grew by 35% last year. The market will grow at 35% and we have got our playbook which is very execution oriented. This year, we have done well as our Ebitda was minus 5% for FY23 which now stands at plus 0.2%, while growing the business at 35%, which means that we believe in growing in a way that we continue to improve our operating profitability.

Are you evaluating any inorganic opportunities?

We are usually more biased towards building than buying because we are an execution oriented team. Some of our acquisitions in Globalbees was a primer engine for the four categories that we are operating. But, our last acquisition was in August 2022. After that, we have not done any acquisitions, because our priming is done. So, after that we have actually built more home brands within Globalbees. We didn't acquire 70 brands. All of that has been built organically over a period of time.

Where will the incremental growth come from?

There is a huge opportunity in India. Childbirth takes place in every corner and we are just scratching the surface with our offline presence. We want to be present in the top 1,000 cities and markets of meaningful size in the country. We will invest behind growing store network with company owned company operated (Coco) stores and franchise owned franchise operated (Fofo) stores.

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But a Coco would mean a capex heavy model?

Out of the 1,000-plus stores we have today, 68% are franchisee owned franchisee operated, which is totally asset light.

Then why invest in Coco?

We believe our unit economics is quite nice in a Coco and the customer experience that we can provide in our Coco store could be enhanced. Therefore, with good unit economics as well as improved customer experience, we believe we have run this business enough to know what and how to do it. Therefore, we want to do this as it can lead to faster expansion as well.