Firstcry IPO opens: Here's all you need to know

Firstcry IPO: Brainbees Solutions, the parent company of popular kids' products maker Firstcry, launched its much-anticipated Initial Public Offering (IPO) on Tuesday, August 6, 2024. The company aims to raise Rs 4,193.73 crore through the IPO, which consists of a fresh issue of Rs 1,666 crore and an Offer for Sale (OFS) worth Rs 2,527.73 crore from existing shareholders.

Firstcry IPO Details

The IPO price band has been set at Rs 440-Rs 465 per share. Retail investors can bid for a minimum of one lot comprising 32 shares, with a maximum cap of 13 lots. At the upper end of the price band, one lot is valued at Rs 14,880.

In total, Brainbees Solutions is offering 90,194,432 shares through this IPO. The distribution includes 27,036,953 shares (29.98 per cent) allocated to Qualified Institutional Buyers (QIBs), 13,518,476 shares (14.99 per cent) to Non-Institutional Investors (NIIs), 9,012,317 shares (9.99 per cent) to Retail Individual Investors (RIIs), 71,258 shares (0.08 per cent) for employees, and 40,555,428 shares (44.96 per cent) for Anchor investors.

Firstcry Business Overview and Financial Performance

Founded in 2010, Brainbees Solutions operates Firstcry, an online platform that offers a wide range of products for mothers, babies, and children up to the age of 12. The company provides various products, including apparel, footwear, baby gear, nursery items, diapers, toys, and personal care products. The platform features products from Indian third-party brands, international brands, and its own private labels, offering over 1.5 million SKUs from more than 7,500 brands.

Brainbees Solutions has positioned itself as a comprehensive resource for parents, offering retail products, content, community engagement, and educational resources. The company has shown strong financial performance, with revenue increasing by 14.72 per cent and profit after tax (PAT) rising by 33.85 per cent between the financial years ending March 31, 2023, and March 31, 2024.

The IPO includes an OFS by existing investors, with notable participants like SVF Frog, a Cayman Islands-based entity of SoftBank, offloading 2.03 crore shares, and Mahindra & Mahindra (M&M) selling 28.06 lakh shares. Currently, SoftBank holds a 25.55 per cent stake in Brainbees Solutions, while M&M owns 10.98 per cent. Other entities participating in the OFS include PI Opportunities Fund, TPG, NewQuest Asia Investments, Apricot Investments, and Schroders Capital.

The company plans to use the proceeds from the IPO for multiple strategic initiatives, including establishing new stores under the "BabyHug" brand, setting up a warehouse in India, and making lease payments for existing stores. Additionally, Brainbees Solutions intends to invest in its subsidiaries Digital Age and FirstCry Trading for the expansion of stores and warehouses in India and abroad, including the Kingdom of Saudi Arabia (KSA). The funds will also support sales and marketing initiatives, technology and data science enhancements, and inorganic growth through acquisitions and other strategic initiatives.

The IPO is managed by a consortium of book-running lead managers, including Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Pvt Ltd, Bofa Securities India Limited, JM Financial Limited, and Avendus Capital Pvt Ltd. Link Intime India Private Ltd serves as the registrar for the issue.

The shares are expected to be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), with a tentative listing date of August 13, 2024.

Should you invest in Firstcry IPO?

Brainbees Solutions is valued at a FY24 EV/sales multiple of 3.4 times and a price to book (P/B) of 5 times based on post-issue capital. The company became EBITDA positive in FY24, demonstrating a 15 per cent CAGR in revenue over the past two years, SBI Securities said in an IPO note. According to SBI Securities, the company is well-positioned to serve the $120 billion market for child, mother, and kids care products.

"It has expanded its store count by 50 per cent to 1,063 stores over the last two years. The breakeven of these stores is expected to contribute to profitability. Currently, the Indian operations contribute 70 per cent of the total revenue with an EBITDA margin of 8.8 per cent, while international operations are loss-making. A turnaround in international operations could significantly boost profitability," SBI Securities said, assigning a 'subscribe for long term' rating.

Brokerage firm Swastika Investmart has a neutral rating on the IPO it says Brainbees Solutions is India's largest online retailer of baby and child care products, known for strong brand recognition, customer loyalty, and engagement. However, the company faces financial challenges, with losses despite revenue growth and negative cash flows underscoring these concerns. Swastika Investmart noted that Brainbees operates in a highly competitive market.

"Due to the lack of profitability, a meaningful P/E valuation cannot be determined. Additionally, the absence of comparable listed peers complicates comparative analysis. As a result, we maintain a 'neutral' stance on the IPO and advise investors to conduct thorough due diligence before making an investment decision," Swastika Investmart said.