Only 10% of the total issue has been made available to retail investors, while 15% is reserved for NII (Non institutional investors) and the remaining 75% will be taken up by QIBs (Qualified Institutional Buyers). The share allotment will be finalised on August 9th, followed by refunds and crediting of shares, which will take place on August 12th. Trading is set to commence on both BSE and NSE from August 13th, 2024.
The company plans to utilise these funds to set up new modern stores for its other brand, BabyHug, investing in Digital Age, one of its subsidiaries, expansion purposes and setting up warehouses in India and KSA, among others.
India's booming childcare market
Presently, India has the largest population of children globally, with approximately 306 million children under 12 years of age as of July 1, 2023, and a birth rate of 16.3 births per thousand people in 2022. In fact, population aged 0-12 accounts for approximately 21% of India’s population as of 2023.The company has substantial headroom for growth, given that childcare products spending per capita in India is currently nascent (between Rs 9,280-9,350) in FY24. It is projected to at a CAGR of 13-15%, which is higher than those in mature markets, between FY24 and FY29. And historically, except for health & food in childcare products, the entire childcare market has been low on brand penetration. There are only a handful number of large multi-category childcare product brands, amongst which FirstCry has made a distinct name for itself.
About the company
FirstCry claims to be India's largest The company functions across various channels, which includes its online platform, which is also present in UAE and KSA (Kingdom of Saudi Arabia), apart from India, and modern stores within the country. As of March 31, 2024, the company had 556 franchise partners, 9 warehouse partners, 302 logistics partners and 567 distributors.
The company is a popular name in mothers, babies and kids segment, with more than 1.65 million SKUs (stock keeping units) from more than 7,580 brands on its multi-channel platform across the clothing and fashion, toys, books, school supplies, diapers, bath and skin care, feeding and nursing, health and safety, baby gear, and maternity categories. The company's GMV has also seen a steady growth, from Rs 52,390 million in FY22 to Rs 75,827 million in FY24.
The company has been steadily ramping up its offline presence, with physical stores making up 23.09% of the company's India GMV in 2024, up from 18.42% in 2022. Conversely, the portion of online sales (as a part of total GMV) has come down from 81.58% in FY22 to 76.91% in FY24.
According to company's RHP (red herring prospectus), 37.07% of company's total GMV (gross merchandise value) in 2024 stems from South India, up from 35.96% in 2022. The share of North India in the company's total GMV has largely been consistent, from 27.25% in 2022 to 27.56% in 2024.
But contribution of west India dipped from 24.03% in 2022 to 21.55% in 2024. The company’s revenues from operations also grew from Rs 24,012.9 million in FY22 to Rs 64,808.6 million in FY24. Additionally, the company's bottom line has been in red for the last 3 years, along with its cash flows.
It incurred losses worth Rs 786.85 million in FY22, which burgeoned to Rs 4,860.56 million in FY23. However, the company has been able to contain its losses, which stood at Rs 3,215.07 million in FY24.
Notably, the company has a high level of dependency on its relationships with third-party manufacturers, particularly for its home brand products. Also, it does not have exclusive agreements with contract manufacturers, suppliers, and third-party brands. As such, a sudden termination or adverse impact on any of its stakeholders is bound to dent the company's financials as well.
Expert Opinion
Says Shivani Nyati, Head of Wealth, Swastika Investmart Ltd,"Brainbees has encountered financial challenges, incurring losses for the past three years despite revenue growth. Negative cash flows further underscore these concerns. The company operates in a highly competitive landscape and relies on third-party manufacturers, suppliers, and brands for its product offerings"."Due to the absence of profitability, a meaningful P/E valuation cannot be determined. Additionally, the lack of comparable listed peers limits comparative analysis. Consequently, we maintain a neutral stance on the IPO and advise investors to conduct thorough due diligence before making an investment".
Kuber Chauhan, analyst at Anand Rathi Research, "At the upper price band company is valuing at Marketcap/Sales of
3.7x with a market cap of ₹24,142 million post issue of equity shares. Therefore, on the valuation front, we believe that the company is richly priced. Thus, we recommend a “Subscribe” rating to the IPO".