The much-talked-about IPO of Brainbees Solutions Limited, popularly known as FirstCry, is finally here. Having held the distinction of being India’s largest multichannel retailing platform for products targeting mothers, babies, and children, FirstCry’s business model and growth potential become very important for any probable investor. We will look deep into Company Details, Industry analysis, Business segments, Financials, Key risks, and IPO specifics in this post.
Company Overview and IPO
FirstCry is India’s premier multi-channel retailing platform and focuses on products for mothers, babies, and kids. The company sells through various channels to ensure wide reach to its target audience. Understanding its operations and the product offerings is essential in getting a feel of its market position.
Since its inception in 2010, FirstCry has built a strong brand in the child care segment across India. The company has been very critical about being a go-to destination for new mothers and families to discover baby products. With the IPO round the corner, prospective investors are keen on learning more about its profitability trajectory amid growth potential in an expanding market. This article delves deep into FirstCry’s current performance, market dynamics, and future outlook.
- Target Audience: Mothers, babies, kids
- Channels: Online, company-owned stores, franchise stores
- Product: Baby clothes, toys, strollers, car seats, maternity wear.
Childcare is regarded as a non-discretionary essential expense; hence, parents always give precedence to spending on their children. Again, this continuous demand generates a reliable customer base for FirstCry, for the simple reason that parents are known to return for new products with the growing age of children.
Industry Analysis
The demographic Indian landscape instrumental in shaping the childcare market, a median age of approximately 28 years makes India one of the youngest nations across the world, ruling spending habits and market dynamics.
- Population of Children: 30.6 crore under 12 years
- Children Account for: 21% of India’s total population
The childcare market is expected to see rapid growth, with estimates showing that the market will continue its growth at a CAGR of 12 to 14 per cent till 2023-24. The drivers in the spending include improved disposable incomes and changing consumer preference.
Child Care Market Landscape
The child care market in India is really huge and expanding. With approximately 26 million babies born every year, the market size is touted to reach USD 68 billion by 2028. This growth would be at a compound annual growth rate of around 20%. FirstCry, being an important stakeholder in this market, quite rightly stands a chance to capture a really significant share of this growth market.
- Rs. 34 billion market opportunity in India
- 26 million births every year
- $68 billion market size by 2028
- CAGR of 20% expected
Spending Analysis: Comparative Spending
The annual spends by Indian parents come to around ₹9,200-₹9,300 per child when comparing spending habits. This number is much more considerable for parents in countries such as China, Saudi Arabia, and the US, hence an opportunity to grow within the Indian market.
- China: ₹45,000
- Saudi Arabia: ₹61,000
- UAE, UK, US: ₹2,10,000
FirstCry Business Segments
The business model of FirstCry can be explained by the different revenue streams of the company. These monetization segments of the company have been categorized as follows.
- India Multi-channel: 70.66% of revenue
- International Markets: 11.63% of revenue
- Global Bees Brand: 18.66% of revenue
The multi-channel segment of India generates revenue from online sales, company-owned outlets, and franchises. The business of international sales caters primarily to the UAE and Saudi Arabian markets. The product categories under Global Bees Brand range from home utilities and personal care products.
Profitability and Revenue Streams
Time and again, the investor community is inquisitive about when FirstCry will turn profitable. It reported that its India multi-channel business has been profitable for the last four years with an adjusted EBITDA margin of approximately 88.8 percent for FY24. This, to a large extent, has served as a good indicator to potential investors.
Gross margins of FirstCry have been debated despite overall profitability. The gross margins of the company stay between 30% to 35%, much below many direct retailers who boast margins of at least 40%. Maheshwari has readily accepted this factor and stated that improvement in gross margin through better assortment mix and curation, along with investment in brand development, is being taken seriously by the company.
Financial Performance
The financial health of FirstCry has to be studied by any potential investor. While the company has shown a positive side in terms of its revenues from operations, it has suffered huge losses in the last two years.
- Revenue Growth: ₹24,012 million to ₹26,400 million
- Yearly Percentage Growth: 15%
- Losses Incurred: ₹78.6 crores to ₹321.5 crores
The losses are a major concern of the Company even after its revenue growth. From the financial reports it was realized that many subsidiaries are uncertain of the going concern which may cripple the financial stability of FirstCry as a whole.
Strategies for Improvement of Margins
Listed below are some of the strategies that FirstCry would have in action to help drive its gross margins further up:
- Better product assortment and curation
- Home brand strategies
- Improving supply chain efficiencies
- Higher brand investments
These strategies would be incrementally built on one another, increasing gross margins without losing their competitive edge at price points. Maheshwari is optimistic that he will see gross margins inching closer to industry majors within the near future.
Risks majorly associated with FirstCry
While considering any investment in an IPO, one should be very clear about its associated risks. FirstCry has discussed several key risks in the RHP that prospective investors must carefully consider before investing.
- Subsidiary Concerns: Material uncertainties in continuing operations
- History of Losses: Possibility of future losses
- Pending Litigations: Major legal liabilities
These risks point out that although FirstCry has an extremely robust business model, vagaries might impact its future performance. Hence, investors have to take a balanced call on these risks vis-à-vis the growth potential of the industry.
Objects of the IPO
The Initial public offering proceeds are earmarked for various critical initiatives. FirstCry has been very explicit in its disclosure of the use that it will make of the proceeds from the IPO.
- Opening new stores
- Setting up warehouses
- Lease payment for new stores
- Investment across subsidiaries
- Organic growth funding
The detailed allocation of funds itself indicates its proactive approach to expansion and operational efficiency, which, in fact, is a good signal for the investors looking forward.
Details of IPO
FirstCry IPO will remain open from August 6 to August 8. Getting to the point about the specifics of the IPO becomes important in order to make well-decided investment decisions concerning the size and structure.
- Total Issue Size: ₹4,200 crores
- Fresh Issue: ₹1,666 crores
- Offer for Sale: Remaining balance
While considering the participation in the IPO by FirstCry, both the financial health and market conditions are to be taken into account. An investor will have an added context to the performance of this IPO only if he/she does a detailed analysis about the sentiment of the overall market.
Segmented Business Overview
The business of FirstCry can be segregated into three broad categories: its operations in India, its international presence, and the house of brands initiative, Global Bees. Each of the foregoing segments contributes to the overall performance and growth potential of the Company.
India Operations
It contributes around 70% to FirstCry’s revenues from India. Although the company has posted a conservative 7% revenue growth in FY24, it is looking at the investment it is making in technology, supply chain improvements, and customer acquisition strategies that would gain market share.
He said that the Indian market is in a phase of flux, and FirstCry is changing fast too in order to serve its consumers. This money from the IPO will actually be utilised for driving these growth initiatives which are going to further make the company more profitable and with great market presence.
International Presence
FirstCry has expanded to the UAE and Saudi Arabia, which have toughened out. It reported a loss of 140 crore in FY24 from its international operations.
He noted that a turnaround plan for these markets is in the works. Maheshwari said he has no doubt that the international business would break even in less than nine years it took for its India operations to do so. This would be based on replicating models that have worked and building on existing strengths.
Global Bees Initiative
The Global Bees initiative is a significant part of FirstCry’s portfolio and includes investments in direct-to-consumer firms across categories such as home decor, jewelry, and gym equipment. Maheshwari said that the competencies built inside FirstCry can be replicated in other categories, thus helping the firm to diversify.
Global Bees clocked in revenues of 129 crores as of FY24 and broke even in adjusted EBITDA within a time span of three years. The growth trajectory seems very encouraging, with expectations to at least match or outperform industry growth rates in the coming years.
Market Conditions and Investor Considerations
This becomes crucial in gauging the prospective success of the FirstCry IPO because this is the current market condition. Even a very strong company may not have good responses if the conditions of the market are not in its favour.
- Market Sentiment: Must for IPO response
- Broader Economic Factors: Influence investor confidence
One should be aware of the market trends and key economic indicators that can influence the performance of the IPO. This would help in arriving at a more informed decision pertaining to investments in FirstCry.
Future Outlook and Aspirations
FirstCry’s future does seem bright, for it has key plans to expand and reach profitability. It would look at increasing its stake in Global Bees while ensuring that international operations become profitable. Maheshwari was still confident that FirstCry would innovate and adapt to the changing market landscape.
Challenges and Considerations
Though on the positive side, the challenges FirstCry needs to handle are as follows:
- Competition in the Child Care Market:
- International profitability
- Changes in market conditions and consumer behavior
- High dependence on private equity investors
Within these areas of concern lies what shall be a huge task to address in order to maintain continuous growth and achieve long-term profitability. How well the company is capable, with flexibility in strategy by playing to its strengths, will be vital in rising above such challenges.
Conclusion
FirstCry IPO has certainly been an exciting opportunity for investors eying the childcare market in India. But FirstCry stands unique in the current landscape because of its strong business model, high market potential, and clear use-of-proceeds plan.
However, there are risks associated, and current market conditions require careful thought. Staying informed and cautious is always the way to go in this dynamic world.namic world of IPO investments.
Disclaimer: The information is only for information purpose only. It is always recommended to consult with certified financial experts before making any investment decisions. Follow busymoneyfreak.com .