The IPO of Brainbees Solutions Limited, the parent company behind the popular Firstcry brand, has officially hit the Indian primary market today. The IPO, which will remain open until Thursday, August 8, 2024, has been met with considerable interest from investors, though the reaction has been mixed.
The company aims to raise ₹4,193.73 crore, with a price band set between ₹440 and ₹465 per equity share. The shares are expected to be listed on both the BSE and NSE.
This IPO includes the issuance of fresh shares worth ₹1,666 crore, signaling that a significant portion of the funds raised will be channeled into the company’s operational needs rather than reducing its growing debt burden. According to market observers, shares of Brainbees Solutions are currently trading at a premium of ₹84 in the grey market, a moderate indicator of demand that suggests some cautious optimism among investors.
Firstcry, well-known for its extensive retail network catering to children’s and maternal products, has established a strong multi-channel presence, combining physical stores with a robust online platform.
However, despite its market leadership and increasing revenues, the company has faced financial challenges in recent years. In FY24, Brainbees Solutions reported a revenue increase of 15%, bringing the total to ₹6,575.1 crore. Yet, the company still posted a loss of ₹321.5 crore, a figure that has raised eyebrows among potential investors.
The company’s debt situation has also worsened, with liabilities swelling from ₹176.5 crore to ₹462.7 crore in the same period. This escalation in debt, coupled with ongoing negative cash flows, has led to concerns about the long-term sustainability of Brainbees Solutions’ business model. Despite these financial hurdles, the IPO is seen by some as an opportunity to capitalize on the company’s established brand and market position, though not without reservations.
Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, has advised investors to consider the IPO for potential listing gains, despite acknowledging the company’s recent losses and negative earnings, which have resulted in a negative P/E ratio.
He suggests that the stock could see a muted listing, potentially trading at around a 20% premium over the issue price. This cautious outlook reflects broader concerns about the company’s ability to turn its financial situation around.
Akriti Mehrotra, a Research Analyst at StoxBox, offers a more detailed analysis of Brainbees Solutions’ challenges. While Firstcry has successfully built a strong brand with significant customer engagement, the company’s financial health remains a serious concern.
Mehrotra points out that the current IPO proceeds are largely aimed at meeting operational needs, with little indication that the funds will be used to address the company’s growing debt or to stem the tide of negative cash flows. Moreover, the company is also grappling with potential regulatory issues and ongoing legal troubles, which add further uncertainty to its financial outlook.
Given these mixed signals, investors are likely to be closely watching the market response to the Firstcry IPO. While the company’s established brand and market leadership are clear strengths, the financial challenges it faces cannot be ignored. The grey market premium of ₹84 suggests some degree of confidence, but it is clear that investors are weighing the risks carefully.
As the IPO remains open for the next few days, the market will be watching closely to see how investor sentiment evolves. The outcome of this IPO could set the tone for future offerings in the Indian market, particularly for companies with strong brands but challenging financial profiles.
For now, the launch of the Firstcry IPO marks a critical moment for Brainbees Solutions, as it seeks to navigate a complex financial landscape while leveraging its position as a leader in the children’s retail sector. Investors will need to weigh the potential rewards against the evident risks before making their decisions.
