FirstCry IPO Off to a Slow Start: What Investors Should Know

The initial public offering (IPO) of Brainbees Solutions Ltd, the company behind the popular FirstCry brand, officially opened for subscription on Tuesday, August 6. The bidding will continue until Thursday, August 8.

FirstCry has set its IPO price band between ₹440 and ₹465 per share. This IPO, valued at ₹4,193.73 crore, includes a fresh issue of 3.58 crore equity shares worth ₹1,666 crore and an offer for sale (OFS) component bringing in an additional ₹2,527.73 crore.

As of the end of the first day, the IPO had only been subscribed to 11 percent. Notably, the portion reserved for qualified institutional buyers (QIBs) went unsubscribed, while retail investors only accounted for a subscription rate of 0.48 percent. Non-institutional investors (NIIs) fared slightly better with a subscription percentage of 0.08, based on the data from the Bombay Stock Exchange.

Shivani Nyati, head of wealth at Swastika Investmart Ltd, commented on the challenges faced by the company, citing a highly competitive landscape and a reliance on third-party manufacturers. She noted that due to the company’s lack of profitability, a meaningful price-to-earnings valuation can’t be established.

Brainbees Solutions has a strong foothold in the market thanks to its well-known home brands like BabyHug, which is recognized as the largest multi-category brand for Mothers’, Babies’, and Kids’ products in India for the financial year 2024.

Despite its brand strength, the company has reported losses in the past three years, raising concerns among potential investors about its financial health, especially in light of its significant debt increase from ₹176.5 crore to ₹462.7 crore.

The company plans to use the proceeds from the IPO for capital expenditures and to fund its subsidiaries, which have faced challenges. However, it is uncertain if these investments will turn around its profitability.

As of now, market analysts are cautious about the IPO, pointing to the company’s ongoing losses and its negative cash flows. They suggest that while FirstCry is a recognized name in the baby and child care product market, the financials may not support a robust investment at this time.

FirstCry’s IPO strategy seems aimed at addressing operational needs rather than significantly paying down debt, which has left some investors uncertain about the future trajectory of the company’s financial success.