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In today’s newsletter: 

• FirstCry CEO offloaded shares worth Rs 300 cr before IPO
• Key highlights from MobiKwik's DRHP
• Byju's staff woes worsen amid deep cost cuts

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When the first batch of unicorns went public in 2021-22, it became clear that retail investors got jittery when early investors and founders sold significant stakes during the IPO.

How will they feel when the same protagonists exit a large number of shares just before the IPO?

FirstCry's CEO, Supam Maheshwari, offloaded 6 million shares, worth over Rs 300 crore, in the 10 days leading up to filing the company’s IPO application. 

• While the Firstcry founder held a 7.46% stake in the company until December 17, it had reduced to 5.95% on the date of applying i.e. December 27

Furthermore, its largest shareholder, SoftBank, recently sold a stake worth Rs 630 crore in the IPO-bound company.

Based on the details provided in the DRHP, our estimates indicate that secondary sales in December occurred at a valuation of approximately Rs 23,700 crore, translating to Rs 487.44 per share.

• Meanwhile, FirstCry is expected to price its IPO at a valuation ranging from $3.5 billion to $3.75 billion

At the upper end of this range, it would represent a 31% premium for those who recently purchased shares at Rs 487.44 each.

The story of startup founders scoring big ESOPs is an unending one. It happened with Zomato’s Deepinder Goyal and Paytm’s Vijay Shekhar Sharma.

• In FY22, FirstCry’s Maheshwari was granted 14.85 million shares as ESOPs

• He took home a remuneration of Rs 200 crore in FY23, Rs 29 crore in FY22 and Rs 14 crore in FY21, including ESOP-based payments

Go deeper

The devil is in the details. 

Despite analyst enthusiasm for MobiKwik’s IPO reattempt, a closer look at the company’s DRHP reveals hidden doubts.

• While the surface reads “gung-ho,” some analysts express concerns about both internal risks and MobiKwik’s long-term growth prospects

Like many fintechs, MobiKwik's business grapples with the inherent risk of a shifting regulatory landscape. 

• Its application for a payment aggregator license, previously rejected, also remains in limbo

Adding to the concerns, MobiKwik has submitted documents to the RBI concerning a discrepancy in recordkeeping and compliance regarding allotments made to certain non-resident shareholders, including Sequoia Capital India Investment IV (now known as Peak XV Partners Investment IV), Tree Line Asia Master Fund, Cisco Systems, and GMO Global Payment Fund.

• This application, submitted in December 2023, awaits the RBI's decision

Like many others, MobiKwik also seeks to boost its flat revenue by doubling down on lending. 

However, while facing stiff competition from well-resourced peers who have surged ahead with product development, MobiKwik remains entangled in renegotiations with lending partners following the Digital Lending Guidelines (DLG) announcement.

• The DRHP reveals that these contracts are under renegotiation

While MobiKwik boasts the lowest employee cost per revenue in the industry and a low EBITDA margin, its scalability and ability to catch up with peers remain doubtful.

• On a side note, the company compensated co-founders Upasana Taku and Bipin Preet Singh with Rs 2.4 crore each for FY23

Byju's slashed its monthly operational expenses by 63% in December 2023 compared to 2022. 

The result? 

Its employees are bearing the brunt!

Poorly maintained washrooms, non-operational elevators, no coffee machines or refreshments, and low employee morale are common sights amid massive cost cuts at Byju’s Bengaluru offices.

This follows the company’s move to cut its expenditure on workplace services down to about Rs 25.73 crore in December 2023, from Rs 44.03 crore in December 2022.

“For a good period in November, the Prestige Tech Park office's toilets had started to look worse than government bus stops. After several complaints, the management got it cleaned. But the issue recurs…. The number of cleaning staff has also been reduced,” an employee told us, requesting anonymity.

This comes at a time when Byju’s is under pressure to repay a $1.2 billion term loan B within the next 3 months. 

• With no indications of its two subsidiaries, Epic and Great Learning, being sold and facing financial constraints, deep cost cuts have become the only solution

The company's expenses related to business process outsourcing plummeted to zero in December, down from over Rs 4.49 crore a year earlier.

• In fact, Byju’s also stopped spending on field sales operations and below-the-line workforce, and digital marketing services

It spent Rs 11.89 crore and Rs 10.31 crore, respectively, on these expenses in December 2022, according to the internal document.

Find out more

• Major cloud computing companies offering new AI tools to businesses provide minimal copyright lawsuit protection.
  
  
• Smart home brand Govee announced updates to their AI Sync Box and Neon Rope Light line of products at CES 2024. 

Forget bombs, Oppenheimer dropped five Golden Globes on Hollywood last night!

Not only did it walk away with the coveted best drama film, but Christopher Nolan snagged the best director award.

• Cillian Murphy took home Best Actor, while Robert Downey Jr. proved he's not just Iron Man with his fiery turn as Best Supporting Actor. 

Meanwhile, the final season of Succession swept the TV categories, proving that dysfunctional families and boardroom bloodbaths are still the ultimate guilty pleasure.

Check out the full list of winners

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