FirstCry parent Brainbees files IPO papers with SEBI; M&M to sell 28 lakh shares

Mahindra & Mahindra Ltd (M&M) will sell a 0.58 percent stake or 28 lakh shares in Brainbees Solutions

Brainbees Solutions, the parent company of online e-commerce unicorn FirstCry, submitted an application for an initial public offering (IPO) with the market regulator Securities and Exchange Board of India (SEBI) on December 28.

The Pune-based company plans to raise Rs 1,816 crore through a primary issue, according to the Draft Red Herring Prospectus (DRHP). In addition to the fresh issue of equity shares, existing investors like automotive company Mahindra & Mahindra (M&M), private equity firm TPG, NewQuest Asia and SoftBank, will together sell a total of 5.44 crore shares in Brainbees via an Offer for Sale (OFS).

Moneycontrol had earlier reported that FirstCry is looking to raise a total of $500 million (around Rs 4,200 crore) through its IPO and 60 percent of that will be the offer for sale (OFS) component while the remaining will be the primary part. FirstCry will only list in 2024.

Also Read | SoftBank sells shares worth $310 million in FirstCry ahead of IPO

The company will use the funds to open new stores and warehouses, and also expand internationally, per the DRHP.

While the share price details are yet to be revealed, FirstCry was eyeing a valuation of about $3.5-3.75 billion for its IPO, slightly higher than $3 billion that it commanded during its last private fundraise.

Apart from notable names like M&M and SoftBank, Apricot Investments, Valiant Mauritius, TIMF, Think India Opportunities Fund, Schroders and PI Opportunities will also sell a stake in FirstCry, according to the DRHP filed before the regulator.

While automobile manufacturer M&M will sell a 0.58 percent stake or 28 lakh shares in Brainbees Solutions, SoftBank will offload 2.03 crore shares in yet attempt to dilute its holdings in the e-commerce major, per the DRHP filing.

More recently, SoftBank had reportedly sold shares worth Rs 630 crore in FirstCry and the same was bought by the family offices of cricketer Sachin Tendulkar, Infosys co-founder Kris Gopalakrishnan, Ravi Modi of Manyavar, the ethnic clothing brand, among several others, in a secondary transaction.

The DRHP also said that FirstCry may consider a private placement of shares to certain investors for up to Rs 363.20 crore.

Financial report card

Firstcry's consolidated net loss widened 6X from Rs 79 crore in FY22 to Rs 486 crore in FY23, regulatory filings showed. At the same time, its consolidated revenue increased 135 percent to Rs 5,633 crore, making the SoftBank-backed company join the league of rare startups having a revenue of over Rs 5,000 crore.

Also Read | IPO-bound FirstCry’s revenue jumps 135% to Rs 5,633 crore in FY23, losses spike 6X

The selling price of the shares will be determined by Brainbees in consultation with the Book Running Lead Managers, once the price band of the IPO is decided. Kotak, Morgan Stanley, Bofa Securities, JM Financial and Avendus are the lead managers for FirstCry.

Going forward, the company expects that its expenses towards marketing, expansion, retail distribution, stock options could adversely impact their financial condition.

"We cannot assure you that we will continue to grow our customer base at this rate or at all in the future. Further, if we fail to acquire new customers, or fail to do so in a cost-effective manner, we may not be able to maintain or increase our revenues or grow our operations," FirstCry stated in its DRHP.