FirstCry sets wheels in motion for IPO, seeking to raise nearly $220Mn

Brainbees Solutions, parent behind Indian baby products unicorn FirstCry, has set the wheels in motion for the Initial Public Offering (IPO) of its widely recognized e-commerce platform, FirstCry. The IPO, which is substantially lower than the $700Mn it had earlier sought, has begun after the company submitted the official application to the Securities and Exchange Board of India (SEBI) on December 28.

The company aspires to raise $220Mn through a primary issue, as outlined in the Draft Red Herring Prospectus (DRHP), as per a report by Moneycontrol. In addition to the fresh equity shares, existing investors, including Mahindra & Mahindra (M&M), TPG, NewQuest Asia, and SoftBank, plan to collectively sell 5.44 crore shares in Brainbees through an Offer for Sale (OFS).

The share prices are yet to be disclosed, however, the firm’s expectations regarding the valuation falls between $3.5-3.75 billion. This marks a subtle increase from the valuation in its last fundraising round of $3 billion.

Proceeds from the IPO are earmarked for various strategic purposes. A substantial allocation of ₹648 crore is designated for the establishment of modern stores and the setup of warehouses, reflecting the company’s commitment to enhancing its physical infrastructure. Additionally, ₹155.6 crore is dedicated to fueling international expansion, emphasizing the company’s ambition to extend its footprint beyond domestic borders.

A strategic investment of ₹170.5 crore is planned for acquiring additional stakes in Globalbees’ indirect subsidiaries, aligning with the company’s pursuit of strategic partnerships. The allotment of ₹100 crore for sales and marketing initiatives underscores the emphasis on promoting brand visibility and customer outreach. Simultaneously, ₹57.6 crore is directed towards investments in technology and data science, showcasing the company’s dedication to technological advancements. The remaining funds are strategically reserved for inorganic growth initiatives and corporate purposes, reflecting a comprehensive approach to utilize the IPO proceeds effectively.

The IPO is expected to be scheduled for 2024 and will be managed by lead managers such as Kotak, Morgan Stanley, Bofa Securities JM Financial, and Avendus. Ahead of the IPO, major stakeholders SoftBank and automotive giant M&M, plan to offload their shares to dilute the holdings in the e-commerce major. Other stakeholders are also reported to make a partial exit in the IPO. According to a report by The Times of India, Softbank sold 310 million dollars worth of shares in the e-commerce major.

This offloading of stakes could be a sign of FirstCry entering more turbulent waters, adding to the existing woes of the company. This year the company had its ups and downs. On one hand, it marked a revenue 2x increase, according to a report by The Financial Express. On top of that, it also managed to enter the interest books of Sachin Tendulkar, the TVS group family and Infosys co-founder Kris Gopalakrishnan, bringing them more funds ahead of the IPO. On the other hand, books highlighted a consolidated net loss surge from ₹79 crore in 2022 to ₹486 crore in 2023, which is a sixfold increase. Brainbees Solutions faces the challenge of balancing expenses related to marketing, expansion, retail distribution, and stock options, which could impact its financial condition, as highlighted in the DRHP.

FirstCry, a blend of online and offline services, caters to the diverse needs of parents in India. From diapering and feeding essentials to toys and fashion accessories, it offers a wide range of quality products for babies, kids, and mothers. It was started with the desire to tackle the problem of Indian parents’ lack of access to the best brands and baby care products. Supam Maheshwari and Amitava Shah started FirstCry in 2010 to overcome the obstacle and provide baby care products to the masses.