FirstCry parent Brainbees Solutions files IPO papers with SEBI

SoftBank-backed e-commerce unicorn Brainbees Solutions, the parent of FirstCry, has filed its draft red herring prospectus (DRHP) with market regulator Securities and Exchange Board of India (SEBI) to raise fund via public offering. This is going to be the first public offering by a large e-commerce firm after Nykaa got listed in 2021.

The initial public offering (IPO) of FirstCry, the country’s biggest retailer in the mother and childcare segment, comprises a fresh issue of equity shares worth up to ₹1,816 crore and an offer for sale (OFS) of up to 54,391,592 shares by existing shareholders.

Under the OFS part, Mahindra and Mahindra will offload up to 2,806,174 equity shares, while SVF Frog (Cayman) and PI Opportunities Fund- 1 will sell equity shares up to 20,318,050 and 8,601,292, respectively. Among others, TPG Growth V SF Markets Pte. Ltd, NewQuest Asia Investments III, Apricot Investments, Valiant Mauritius Partners FDI, TIMF Holdings (Mauritius), Think India Opportunities Master Fund LP (Cayman), Schroders Capital Private Equity Asia Mauritius II will also partially pare their stake via OFS.

The company intends to use capital raised from issuance of fresh equity shares for funding the expenditure for setting up new modern stores; a warehouse and lease payments for its existing identified modern stores in India. The fund will be also used to invest in its subsidiaries - FirstCry Trading for overseas expansion and GlobalBees Brands towards acquisition of additional stake in its indirect subsidiaries. A part of the capital will be used for funding of inorganic growth through acquisition and other strategic initiatives as well as for general corporate purposes.

Established in 2010 by Supam Maheshwari and Amitava Saha, FirstCry platform was launched to create a one-stop destination for parenting needs. The company offers products in various categories, including apparel, footwear, baby gear, nursery, diapers, toys and personal care, amongst others. The multi-channel retailing platform includes FirstCry online as well as physical stores comprising franchisee-owned, franchisee-operated modern stores, company-owned and company-operated modern stores as well as general trade retail distribution.

As of June 30, 2023, the company offers more than one million stock keeping units (SKUs) from over 6,800 brands, including prominent third-party Indian brands, global brands, and their own home brands. It has a network of 936 FirstCry and BabyHug modern stores in 465 cities in 27 states and four union territories across India with over 1.76 million square feet of retail space, as of June 30, 2023.

Over the financial years 2021 to 2023, FirstCry's consolidated revenue from operations has grown from ₹1,602.85 crore in FY21 to ₹2,401 crore in FY22, and further to ₹5,632.54 crore in FY23. The revenue growth was driven by both organic growth and inorganic growth (in particular, the acquisition of Digital Age in May 2022).

However, the losses of the company ballooned more than 6 times to ₹486 crore in FY23 as compared to ₹79 crore in FY22, dented by higher expenses. The total expenses surged 146% to ₹6,316 crore in FY23 from ₹2,568 crore in the last fiscal. The cost of procurement of materials, which accounted for 62% of the overall cost, rose 2.5 times YoY to ₹3,935 crore, while employee benefits and advertising spent grew by 127% and 55%, respectively in FY23.

Ahead of the IPO, Japanese conglomerate SoftBank sold shares worth $310 million (around ₹630 crore) in FirstCry in two rounds. SoftBank is the largest shareholder and holds around 25% stake in the ecommerce company currently. The stake sale paved the way for family offices and investment firms to pick up shareholding in the firm. Recently, Infosys co-founder Kris Gopalakrishnan, TVS group family, Ravi Modi of ethnic wear brand Manyavar, and Family offices of Indian cricketer Sachin Tendulkar invested in the company. Adding to it, Marico’s Harsh Mariwala’s Sharrp Ventures, Manipal Group’s Ranjan Pai’s MEMG Family Office, and Hemendra Kothari's DSP family office also picked shares in FirstCry.

Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited, BofA Securities India Limited, JM Financial Limited and Avendus Capital Private Limited are the Book Running Lead Managers to the issue.