Bangalore: Even as some of the top-tier startups are postponing their initial public offering (IPO) plans amid greater economic uncertainty, e-commerce firm FirstCry is moving ahead with its $1 billion IPO and will file its paper drafts next month, as people have been informed of the matter
Originally, the Pune-based retailer, which is backed by SoftBank and Premji Invest, was considering a $600-$700 million IPO, but has now decided to increase the offering to as much as $1 billion. The company believes market sentiment will improve and there will be enough appetite for good companies among public market investors before it can list here in the second half of the year, the people said.
The e-commerce company, which sells baby care products, is likely to offer new shares as well as shares held by some of the IPO’s existing investors, with the latter accounting for around 75% of the total issue size, the people added. This means that the primary stock sale in FirstCry’s IPO would be around $250 million. Proceeds from the sale of shares by existing investors will not go to the company.
As it prepares to submit draft papers to the market regulator Securities and Exchange Board of India (Sebi), the company has also completed board approvals to convert from a limited liability company to a public company. This is a formal process that must be followed before nodding to Sebi.
“They (FirstCry) have now finalized plans to make this a $1 billion release size. Board approval also applies when FirstCry’s parent company, Brainbees Solution, has become a public company,” said a person familiar with the matter.
rating and profit
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FirstCry turned profitable in fiscal 2021, according to the latest regulatory filings, posting a net profit of almost Rs 216 crore compared to a loss of Rs 191 crore in the previous year. FirstCry reported operating revenue of Rs.1,603 crore in FY21 compared to Rs.814 crore a year earlier.
FirstCry, which was founded in 2010 and is led by Supam Maheshwari, could target a valuation of nearly $7 billion for its debut on Dalal Street, people familiar with the matter said.
“The profitable company will mean that FirstCry will be able to earn a valuation premium amid a broader correction in late-stage new-age companies. According to internal estimates, it plans to report higher profits in fiscal 2022,” said this person. The Company’s most recent financial information is contained in its draft Red Hering prospectus (DRHP).
When asked, FirstCry’s Maheshwari declined to comment on the IPO plans.
ET reported on April 1 that FirstCry’s $240 million secondary financing deal with India’s sovereign wealth fund, the National Investment and Infrastructure Fund, had failed. Existing investor Premji Invest is likely to step in and invest more in the company, the newspaper reported.
Before the deal went through, FirstCry had completed a $315 million secondary stock sale in March of last year. SoftBank is its largest investor, with a over 30% stake in the omnichannel retailer. It was last valued at around $2.3 billion to $2.5 billion. It has around 600 stores in India and also has a presence in the United Arab Emirates.
Other startup IPOs delayed
FirstCry’s DRHP filing next month comes at a time when startups like Delhivery and PharmEasy have had to postpone their listing plans due to market volatility, particularly in new-age stocks like Zomato, Nykaa and Paytm. Both Delhivery and PharmEasy had secured Sebi’s approval and initially planned to go public in the most recent fiscal year ended March 31.
“We want to go public when our company is well understood. While valuation is one of the factors (for the delay), it’s not a critical factor – as we don’t need capital and market conditions are currently bumpy,” Sahil Barua, co-founder and CEO of Delhivery, told the Economic Times Startup Awards 2021 last year Month. Delhivery submitted its DRHP to Sebi for a $970 million IPO in November last year.
PharmEasy is also cautious, trying to understand the pulse of the market in terms of demand for its shares. These startups are also pursuing the much-touted LIC IPO, now expected next month after being delayed due to market volatility amid the Ukraine-Russia war. ET reported on April 24 that LIC’s board of directors approved a 3.5% stake sale in the IPO for about $3 billion. Before the markets got jittery, she had plans for an issuance size in excess of $8 billion.
SoftBank-backed Oyo Hotels & Homes also filed for a $1.2 billion IPO with Sebi last November but has yet to secure regulatory approval. ET has also reported that its issuance size is likely to be under $1 billion in the future. Following Paytm’s disastrous debut on exchanges, its smaller competitor Mobikwik shelved its plans for a listing amid increasing scrutiny and fears of fintech models and their ability to generate profits.
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