FirstCry IPO Day 2: Should you apply or not? GMP, subscription status and more

The initial public offering (IPO) of Brainbees Solutions Limited, which operates under the FirstCry brand, opened for subscription on Tuesday, August 6, and will remain open until August 8. The price band for the offering is set between ₹440 and ₹465 per equity share, with a face value of ₹2 each.

Retail investors can submit bids for up to 13 lots, each comprising 32 shares. At the upper end of the price band, ₹465 per share, the minimum investment required is ₹14,880 per lot. This IPO is the second largest of 2024 in terms of size.

FirstCry IPO GMP, or grey market premium, is ₹45 per share, according to stock market observers. This indicates that the equity shares of Brainbees Solutions are trading at ₹510 apiece in the grey market, a premium of 11.8% to the issue price of ₹465 per share.

Subscription status on Day 02

The IPO has been subscribed to by 17% so far. The public issue received bids for 86.42 lakh equity shares as against 4.96 crore shares on the offer, according to the NSE data available until 12:00 pm on Wednesday, the second day of the bidding process.

The IPO has been subscribed to 74% in the retail category, while the portion reserved for employees has been subscribed to 2.72 times. The Non-Institutional Investors (NII) category has been subscribed to 13% so far, while the Qualified Institutional Buyers (QIBs) are yet to place their bids.

About Brainbees Solutions

The company is the largest multi-channel retail platform for mothers, babies, and kids products, with a growing presence in select international markets. The company launched the FirstCry platform, a one-stop destination for parenting needs encompassing commerce, content, community engagement, and education.

It offers a wide range of products, including apparel, footwear, baby gear, nursery items, diapers, toys, and personal care, from Indian third-party brands, global brands, and its own brands.

The company provides over 1.6 million SKUs from 7,500+ leading Indian and global brands. The company seeks to develop multi-year relationships with mothers, starting from the baby’s conception and continuing until the child reaches about 12 years of age, as per the company's DRHP report. 

Issue details

The company is seeking to raise a total of ₹4,194 crore through this issue, which includes an offer for sale of ₹2,528 crore and a fresh issue of ₹1,666 crore. The funds will be utilised for several key purposes. This includes the establishment of new modern stores under the "BabyHug" brand and the construction of a warehouse in India.

Additionally, the funds will cover lease payments for existing modern stores owned and operated by the company in India. Investments will also be made in its subsidiary, Digital Age, for setting up new modern stores under the FirstCry brand and other house brands, as well as lease payments for existing stores under Digital Age’s control in India.

Further, the company plans to invest in its subsidiary, FirstCry Trading, to support overseas expansion by establishing new modern stores and warehouses in Saudi Arabia (KSA). Investment in Globalbees Brands will focus on acquiring an additional stake in its subsidiaries.

The allocation also includes funding for sales and marketing initiatives, technology and data science costs, including cloud and server hosting, and financing inorganic growth through acquisitions and other strategic initiatives, along with general corporate purposes.

Should you apply for the IPO?

Most domestic brokerage firms have recommended subscribing to the IPO due to the company's strong brand positioning. SBI Securities highlighted that the company is well-positioned to cater to the $120 billion market for child and mother-and-kid care products, noting its pioneering role in multi-channel retailing in India. It recommends a 'Subscribe' rating to the issue for long-term gains.

Nirmal Bang pointed out that FirstCry’s shares are priced at an EV/sales ratio of 3.8x for FY24, which is lower compared to Nykaa’s 8.4x. It emphasised FirstCry’s leadership in the baby products segment and recommended subscribing for long-term gains.

AUM Capital also supports a 'Subscribe' recommendation, citing the rise in disposable income, which leads parents to spend more on their children’s wellbeing. It believes FirstCry’s unique brand positioning and market share make it a top choice among prospective customers.

The brokerage has noted that India's low childcare penetration presents a significant opportunity for branded players like FirstCry, and further investments into manufacturing are expected to enhance its domestic and international presence.

Canara Bank Securities described the IPO as a compelling investment opportunity, given the expansive Total Addressable Market (TAM) and the company’s robust operational framework. It also notes that FirstCry's 84% share of the unorganised market and 16% share in the organised space position it well to capture a larger segment of the organised market.

The brokerage mentioned that the company’s long-standing customer base, which spans 15–16 years, ensures a continuous stream of business, reinforcing its position in the childcare market. Therefore, the brokerage firm recommends a 'Subscribe' rating to the IPO for long-term gains.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.