FirstCry Eyes IPO, Early Backers Looking for Exit

According to reports, the early investors of FirstCry, including Chiratae Ventures, Elevation Capital, and Vertex Ventures, are looking to sell their stake in the firm for 180 million USD in a secondary transaction. The fundraise could value FirstCry's parent company, BrainBees Solutions, at about 2.1 billion USD.

The early investors of FirstCry, like Chiratae Ventures, Elevation Capital, formerly SAIF Partners, and Vertex Ventures, are reportedly looking to sell approximately 7 to 9% of their sales in the company for 180 million USD in a secondary transaction. There are expectations that the fundraise would value the parent company of FirstCry, BrainBees Solutions, at about 2.1 billion USD, which is almost double of its last funding round. 

Supam Maheshwari and Amitava Saha (1) founded the Pune-based startup, FirstCry in 2010. It offers different categories of infant and kids products, from apparel to other essentials. It has now expanded its user base to more than 4 million and has a retail footprint of more than 300 stores in over 125 cities across India. FirstCry has claimed that it offers more than 2 lakh baby and kid products in 6,000 brands.

In February last year, FirstCry had secured 296 million USD or 2,120 crores INR in its Series E funding round from Softbank Vision Fund to join the unicorn club (2). The market believes that the investment is the first transaction of the total 400 million USD funding committed by Softbank, as per its filing with the corporate affairs ministry. 

With the investment, the Japan-based company became the largest stakeholder in the decade-old firm, which had a valuation of about 1.1 billion USD during the investment time. 

According to Crunchbase (3), FirstCry has secured about 428.4 million USD in a total of eight funding rounds to date. An ET report (4) also suggests that the funding round comes when the retailer is looking to realign its cap table before going for an IPO, initial public offering in the upcoming two to three years. 

According to the people aware of the matter, some of FirstCry’s early backers, such as Chiratae Ventures, NEA, Vertex Ventures, and Elevation Capital, are probably looking to sell their shares.

Reports also suggest that the Investment bank Avendus Capital has been mandated to search for buyers. A third person stated that large family offices and global private equity are sounded off and would submit term sheets as soon as possible.

In the financial year ending on March 31, 2020, FirstCry witnessed its revenue jump by 68% from 535 crore INR in 2019 to 897 crore INR in 2020.

During the same time, the online baby care company observed its expenses drop by 26% from 1,468 crore INR in financial 2019 to 1,088 crore INR in the fiscal year 2020. Consequently, FirstCry saw that its net loss is down 83% from 933 crore INR to 191 crore INR.

The Emergence

FirstCry is an eCommerce portal that provides over two lakh baby and kids products from over 6,000 brands across categories, including toys, apparel, diapering, accessories, and more. Moreover, the portal offers other different products such as maternity care, nursing, feeding, skin care, and healthcare.  

Worldwide, approximately 18% of total baby births take place in India. On January 1, 2019, the country made the biggest record with 49 births a minute. Now, one can easily imagine the potential the market holds for baby care products.

Moreover, the increase in the dual-income group in nuclear families and the requirement for baby care products because of the high birth rate incite the country’s baby care market’s growth every day. In 2012, the market was about 2 to 3 billion USD in India, and it has now reached over 12 billion USD with a positive growth curve. 

FirstCry was established with a seed capital of 25 million INR, and now it has turned into a 2 billion USD and Asia’s biggest in the baby care e-tailing sector (5). 

It has become a leader in the segment with over 10 to 15% month on month growth. According to the Grand View Research report (6), the market size for baby products globally was 62.71 billion USD in 2018. It is now growing at a 6.9% CAGR, compounded annual growth rate. 


The Revenue Jump

In the financial year 2020, the SoftBank-backed omnichannel unicorn retail for baby products had reported a 65.8% surge to 887.5 crore INR from 535 crore INR during 2019. FirstCry is now competing with HopScotch and other big horizontal marketplaces like Amazon and Flipkart in its segment. 

Its business growth is also reflected in the overall improvement in the ecommerce vertical post the lockdown as consumers are moving towards online shopping amid the pandemic. It has resulted in pent-up demand. 

Amid the COVID-19 pandemic and safety concerns, people prefer online shopping portals to browse, discover, and shop products across different categories such as grocery, apparel, medicines, and more, including doctor consultation and education.

The key reason for the ecommerce platforms, including FirstCry, to see a jump in online baby care product purchases by parents is replacing wardrobes for toddlers and infants who have outgrown their garments during the lockdown phase. 

FirstCry had acquired BabyOye retail brand from Mahindra in 2016, and then it also launched the FirstCry parenting service in 2017. It is forayed in the Middle East market, UAE, in 2019. The online childcare market rose to about 500 million USD in 2019 out of the approximately 22 billion USD childcare market. It is also likely to rise at about 13% CAGR to about 39 billion USD until 2023, as per RedSeer (7). 

During the same period, the founders also spun out their logistic division, XpressBees, into a separate company. And the duo subsequently raised investment from Jack Ma-owned Alibaba Group Holdings. 

Last year, XpressBees secured 110 million USD in its Series E funding round from private equity firms including Investcorp, Norwest Venture Partners, and Gaja Capital.

Presently, the reports suggest that the early backers of FirstCry are looking to sell approximately 7 to 9 percent shares in the company for 180 million USD in a secondary transaction.

Their last funding round from SoftBank Vision Fund came when the retailer sought to realign its cap table to fore-launch an IPO in the upcoming two to three years. 

“Some of the company’s early backers — Chiratae Ventures, NEA, Vertex Ventures, and Elevation Capital — might be looking to sell their stakes,”

– Sources, ET (8).  

With the secondary round, FirstCry’s valuation would nearly double to 2.1 billion USD.

There is no response from Supam Maheshwari, the chief executive of FirstCry, regarding the reports (9). 

Before FirstCry, there were several reports of local startups going for IPO in 2021. There are reports of more than 22 IPOs coming this year, including LIC, Nykaa, and Zomatho. 


Local Startups IPOs

It is worth highlighting that Indian startups secured about 12.8 billion USD in approximately 1,350 funding rounds from investors last year, according to Tracxn Technologies’ data (10). While deal value and volumes in 2020 were lower than in 2019, there are expectations that this year would bring a sea change. 

Even though there was a drop in overall investments, surprisingly, the numbers are still healthy considering the COVID-19 pandemic. When the crisis started in March last year, public markets collapsed worldwide, and investors stopped private investments. India has also put restrictions on investment from China (11). 

When the entire nation was under lockdown from March to June, there was a suspension in the deal-making. However, as soon as India started unlocking, deal-making rapidly surged, especially in the second half of 2020. By the end of last year, about a dozen Indian startups had entered the unicorn club, which is the most in any year. 

Several factors played a vital role in funding to stay up in the country. The United States led the rise in the public market and helped surge up investor confidence. Moreover, low-interest rates allowed investors to manage the risk of investment funding. 

Another biggest reason was that the coronavirus pandemic triggered an acceleration for digitization across all sectors. It includes digital education, enterprise software, and logistics. While segments like bike and car aggregation and financial technologies struggled to attract investments, they were among the biggest beneficiaries. 

Some of the most significant investments included 660 million USD by Zomato, 500 million USD by Byju’s, 300 million USD by FirstCry, and 225 million USD by Dream11 (12).

Meanwhile, Reliance Industries Ltd also raised a mammoth 26 billion USD investment in 2020 (13); the data is not included in the Tracxn report for its retail and digital subsidiaries. Notably, Reliance digital and retail ventures have become a major player in the Indian internet ecosystem. It has also acquired several startups the previous year and is now competing with incumbents in a wide array of sectors. 


The Excitement

For now, local startups’ funding may continue to remain robust because of the overabundance in present capital. Until the coronavirus prevents a complete return to normalcy, industries like digital content, education, and software would continue to prosper. 

However, other sectors, such as consumer transportation, would pick up only when the pandemic would be largely over. The speed of the vaccination program, the fate of IPOs by leading startups, the performance of companies who have raised massive funds, and the consumption strengths would determine the funding fate going ahead. 

It is worth highlighting that the IPOs are the holy grail for all startups. However, apart from a few exceptions, such as Makemytrip and Indiamart, most Indian startups have failed to go public successfully. The scenario is now changing, even if gradually. 

A handful of profitable companies such as Druva, Freshworks, Delhivery, and PolicyBazaar have announced their plans to list their shares in the upcoming future. If they could pull off successful IPOs, it would mark a turning point for Indian startups. In turn, it would lead to more capital for Indian startups (14). 

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Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

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Rucha Joshi
Rucha Joshi
Rucha Joshi is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student. She's currently working as a content writer and is always interested in a challenge.

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