FirstCry founder and managing director Supam Maheshwari offloaded 6.2 million shares in the company in the 10 days prior to filing for an initial public offer, according to the company's draft red-herring prospectus (DRHP).
At Rs 487.44 each, the highest price at which a secondary share sale was executed in December, Maheshwari's offloaded shareholding would be worth more than Rs 300 crore. The FirstCry chief executive officer has also listed himself as a selling shareholder in the public issue.
While the Firstcry boss held 35,097,831 shares (7.46 percent stake) in the company till 10 days prior to filing of the draft papers, his holding had reduced to 28,893,347 shares (5.95 percent stake) on the date of filing the application.
Sources said that FirstCry founders, apart from SoftBank, sold shares in a recent round of share sale, at a valuation of over Rs 23,000 crore. Moneycontrol’s estimates on the basis of details provided in DRHP show that secondary sales in December happened at a valuation of around Rs 23,700 crore or Rs 487.44 per share.
FirstCry is expected to price its IPO at a valuation of $3.5-3.75 billion. At the upper end of the range, it would be a 31 percent premium for those who bought the shares at Rs 487.44 each in December.
The DRHP showed that Maheshwari has offloaded 9.34 million shares during six months before the date of filing of the DRHP. At the price of Rs 487.44 apiece, this share transfer would be worth over Rs 455 crore.
The IPO filing also revealed that a board resolution on December 27, when FirstCry filed its application to go public, transferred 14.9 million shares at Rs 243 apiece to the company’s ESOP trust.
According to a unicorn chief financial officer who did not wish to be named, such transfers to ESOP trust may be undertaken to dilute the shareholding of a promoter in lead up to an IPO or dilute the shareholding of a foreign investor to comply with foreign direct investment norms.
FirstCry has not responded to Moneycontrol’s queries on the matter.
The FirstCry CEO’s stake in the company had reduced to 5 percent and 3.7 million shares at the end of FY21. It then rose to 17 percent and 15.2 million shares at the end of FY22 and further to 9 percent and 38.2 million shares at the end of FY23.
The increase in his number of shares would have happened partly on account of a sub-division of shares leading up to the IPO and partly due to employee stock options (ESOPs) granted to him by the company. In FY22, Supam Maheshwari was granted 14.85 million shares as ESOPs are expected to vest over a period of time.
According to the DRHP, the FirstCry founder took home a remuneration of Rs 200 crore in FY23, Rs 29 crore in FY22 and Rs 14 crore in FY21, including short-term employment benefits and share-based payments accrual. In the first quarter of FY24, Maheshwari’s remuneration was Rs 26 crore.
FirstCry’s ESOP costs or share-based payment expenses doubled from Rs 46 crore in FY21 to Rs 92 crore in FY22, and jumped almost four times from Rs 92 crore in FY22 to Rs 361 crore in FY23. The ESOP cost in the first quarter of FY24 was Rs 45 crore.
The SoftBank-backed company saw its loss widening from Rs 79 crore in FY22 to Rs 486 crore in FY23.
In its IPO, FirstCry aims to raise Rs 1,816 crore through a primary issue of equity shares. Existing investors like automotive company Mahindra and Mahindra (M&M), SoftBank, Premji Invest, TPG, NewQuest and others will sell a total of 5.4 crore shares in the offer-for-sale (OFS).
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