Firstcry IPO: Issue details, objectives, and more - 10 key things to know from DRHP

Brainbees Solutions, the parent company of the prominent online e-commerce platform FirstCry, has officially filed an application for an initial public offering (IPO) with the Securities and Exchange Board of India (SEBI) on December 28.

The firm seeks a valuation of about $3.5-3.75 billion, according to multiple reports. Notably, SoftBank holds the largest stake in FirstCry, 25.5 percent, making it the primary shareholder in the online e-commerce unicorn.

Firstcry IPO: Here are the top 10 things from DRHP

About the issue: The IPO comprises of issuance of fresh equity shares worth ₹1,816 crore as well as an offer for sale by existing shareholders and promoters. Existing investors, including Mahindra & Mahindra (M&M), private equity firm TPG, NewQuest Asia, and SoftBank, are planning to collectively sell 5.44 crore shares in Brainbees through an Offer for Sale (OFS) alongside the primary issue.

According to the document, Mahindra will sell its 0.58 percent stake in the parent company; SoftBank will offload 2.03 crore shares.

The DRHP also said that FirstCry may consider a private placement of shares to certain investors for up to ₹363.20 crore.

IPO dates: Firstcry has not announced the opening and closing dates for the IPO subscription yet in its DRHP, however, several media reports claim that the public issue will open in early 2024. The offer price for the issue and IPO price band have also not been announced so far.

IPO reservation: The issue is being made through the book-building process, wherein not less than 75 percent of the issue shall be available for allocation on a proportionate basis to qualified institutional buyers (QIBs), not more than 15 percent of the issue will be available for allocation to non-institutional investors (NIIs), and not more than 10 percent of the issue shall be available for allocation to retail individual bidders.

IPO objectives: As per the DRHP, net proceeds will be used to set up new retail stores, warehouses and international expansion.

About the firm: The SoftBank-backed FirstCry offers toys, apparel and accessories for babies, kids and mothers through online and physical stores. As at June 30, 2023, the company offers more than one million SKUs from over 6,800 brands, including prominent third-party Indian brands, global brands, and home brands. As at June 30, 2023, the FirstCry mobile application has been downloaded more than 104 million times in India. Further, It has a network of 936 FirstCry and BabyHug modern stores in 465 cities in 27 states and four union territories across India.

Financials: FirstCry reported a six-fold jump or 515% increase in its net loss for FY23 at ₹486 crore from ₹79 crore in FY22 led by surge in expenses. The company’s revenue from operations during the financial year 2022-2023 increased 135% to ₹5,633 crore from ₹2,401 crore in FY22 led by strong demand. Its ROCE stood at -7%, while its EBITDA margin was at -2%. The company’s income from the sale of products surged 2.37 times to ₹5,519 crore in FY23.

Competitors: As per the DRHP, FirstCry competes primarily with organised players in the India Childcare Products market. These include horizontal online platforms such as Amazon, Flipkart, and Meesho, among others, vertical online platforms such as Hopscotch, Myntra, and Ajio, among others, and multi-brand and exclusive retailers such as Reliance Trends, and Gini & Jony, among others. There are no large organised speciality vertical multi channel players in India's Childcare Products market.

Industry overview: According to the RedSeer Report, India has the largest population of children globally, with approximately 309 million children under 12 years of age as at July 1, 2022, with a birth rate of 16.4 births per thousand people in calendar year 2021. Childcare products spending per capita in India is currently nascent, at only ₹7,975 in the calendar year 2022, and is projected to grow faster than those in mature markets, at a CAGR of approximately 15% from 2022 to 2027 (compared to 3% for USA and 7% for China), informed the DRHP.

Book-running managers: Kotak, Morgan Stanley, Bofa Securities, JM Financial and Avendus are the book-running lead managers, and Link Intime India Private Limited is the registrar of the offer.

Risks: Going forward, the company expects that its expenses towards marketing, expansion, retail distribution, and stock options could adversely impact its financial condition.

"We cannot assure you that we will continue to grow our customer base at this rate or at all in the future. Further, if we fail to acquire new customers, or fail to do so in a cost-effective manner, we may not be able to maintain or increase our revenues or grow our operations," FirstCry stated in its DRHP.