In this article, we delve into the IPO of FirstCry, a prominent player in the baby care and children's products market. Established in 2010, FirstCry has grown from a niche online marketplace to a significant retail and online presence in India and beyond. We will examine the company's business model, financial health, strengths, and weaknesses to determine if investing in their IPO is worthwhile.
Business Model
FirstCry initially operated as an online marketplace, selling products from various brands for babies and young children. Their offerings included powders, creams, oils, diapers, toys, clothes, and shoes. Over time, they launched their own private labels like Baby Hug and Cute Walk, expanding their product range. Today, FirstCry boasts over 7,500 brands and 1.6 million products, covering ages from birth to 12 years.
The company has transitioned to include offline stores, with 1,033 locations across 28 states and 5 union territories. Additionally, FirstCry's products are available internationally in the UAE and Saudi Arabia.
IPO Details
- Opening Date: August 6
- Closing Date: August 8
- Price Band: ₹440 to ₹465
- Total IPO Size: ₹4,194 crore
- Fresh Issue: ₹1,666 crore (for growth and expansion)
- Offer for Sale (OFS): ₹2,527 crore (for existing investors and founders)
The funds raised will be used to enhance their offline and online presence, open new stores, expand warehousing, and invest in technology.
Financial Analysis
- Revenue Growth: Revenue has surged from ₹2,516 crore in 2021 to ₹6,575 crore this year, showing robust growth.
- Losses: The company has reported increasing losses, from ₹78 crore initially to ₹321 crore recently. The losses are expected to be offset by future revenue growth.
- Assets and Liabilities: Assets have grown from ₹6,127 crore to ₹7,510 crore. However, liabilities have also increased significantly, with debt rising from ₹90 crore to ₹462 crore.
- Net Worth: The net worth has decreased from ₹3,527 crore to ₹3,170 crore.
Strengths
- Market Position: FirstCry is a leader in the organized baby care segment, holding a 16% market share in a rapidly growing industry.
- Experienced Leadership: Supam Maheshwari, an IIM Ahmedabad graduate, leads the company. His experience and other successful ventures add credibility.
- First-Mover Advantage: FirstCry enjoys a first-mover advantage with a broad online and offline presence, a comprehensive supply chain, and strong logistics.
Weaknesses
- High OFS Proportion: A significant portion of the IPO is an offer for sale, which means less capital is being invested back into the company.
- Increasing Debt: The company’s rising debt and financial losses could be concerning for potential investors.
- High Valuation: Despite growing revenue, the company's valuation of ₹24,000 crore seems high given the current profitability issues.
Conclusion
FirstCry presents a compelling investment opportunity with its extensive market reach and growth potential. However, the high valuation and significant debt might pose risks. Investors should weigh these factors carefully and consider their own financial situation before investing in this IPO.
