FirstCry IPO

FirstCry IPO will open for subscription on August 6, 2024 and close on August 8, 2024. We break down the multi-channel retail platform's strengths, weaknesses, and growth prospects to help investors make an informed decision. FirstCry IPO in a nutshell Quality : Its three-year average ROE and ROCE were -7.6 per cent and -7 per cent, respectively. Growth : Its revenue grew 64.3 per cent per annum between FY22 and FY24, but the company reported a cumulative loss after tax of Rs 787 crore over the same period. Valuation : Post the IPO, the stock will be valued at a P/B ratio of 5 times. The P/E ratio can not be determined as the company has been loss-making in the last three years. Overview: India has among the highest birth rates globally. The demand for child care products is also growing 10 per cent annually, as per industry estimates. Against this backdrop, the company's already established brand will translate into strong growth. However, the company operates in a very fragmented industry and faces stiff competition from many unorganised and organised players. About FirstCry (Brainbees Solutions) With the highest gross merchandise value (GMV), FirstCry, owned by Brainbees Solutions, is India's largest multi-channel retail platform for mother and child care products like clothing, toys, diapers, and baby food, among others. It has 1,063 stores in 533 cities and enjoys a market share of 16-17 per cent in the organised child care product market by GMV (as of FY24). It sells its own brands and third-party brands through its online platform, offline stores, and general retail outlets. Its online platform also caters to global markets of the UAE and Saudi Arabia. But it earns most of the sales from the India business, which accounted for 70 per cent of its total revenue in FY24. FirstCry's strengths Solid client connection: The company has built solid rapport with its customers that helped it become the market leader (in the organised segment) and capture share away from unorganised players. Since childcare is a non-discretionary expense with high purchase frequency, the company believes that parents tend to start a predictable and frequent purchase journey once they establish a connection with the platform. The online platform also allows customers to assess the pricing with ease, while the offline channels allow evaluating product quality. Robust distribution: The company touts a robust supply chain from manufacturing to distribution. In FY24, it partnered with 900 contract manufacturers for its own brands. The company also has an impressive integrated supply chain of 80 warehouses, stockists, 567 distributors and over 1,312 sub-distributors that enable same day deliveries in 45 cities and next-day deliveries in 1,043 cities in India. FirstCry's weaknesses Streak of losses: The company has been loss-making for the last three years with negative cash flow from operations as it remains primarily focused on expansion and gaining market share. The same is true for some of its material subsidiaries, four of which, recorded negative net worth with total losses of over Rs 21 crore in FY24. Another subsidiary Firstcry Retail DWC has reported a cumulative loss of Rs 342 crore (as of FY23) since its inception in 2019. High goodwill due to rapid inorganic growth: The company's goodwill on the balance sheet has steadily increased to 21 per cent in FY24 from 15 per cent in FY22 due to its aggressive and rapid acquisition spree. In the last four years, it made five acquisitions worth about Rs 1,287 crore. High goodwill is undesirable on the balance sheet due to high risk of impairments, which can severely dent the company's financials. Suggested read: 8 reasons why Ola Electric IPO does not deserve your money FirstCry IPO details Total IPO size (Rs cr) 4,194 Offer for sale (Rs cr) 2,528 Fresh issue (Rs cr) 1,666 Price band (Rs)