Brainbees Solutions, which operates omnichannel kidswear brand FirstCry, floated its IPO with a valuation of $2.9 billion. For FY24, the company reported revenue of Rs 6,480.8 crore, a 15% increase from Rs 5,633 crore in FY23. Losses were reduced to Rs 321 crore in FY24, down 34% from Rs 486 crore in FY23.
FirstCry has set a price range of Rs 440-465 per equity share for its upcoming IPO, which will be open for subscription on August 6 and close on August 8. The Pune-based startup aims to raise Rs 4,193 crore at the upper price band through this IPO. The firm is expected to list on exchanges on August 13.
Supam Maheshwari, Managing Director and CEO of Brainbees Solutions Limited (FirstCry), spoke with Storyboard18 about the company’s advertising and marketing strategies. He also provided insights into their expansion plans and the growth of product categories for the brand.
Income Tax Investigation
When asked about the ongoing investigation by the Income Tax Department regarding alleged tax evasion, Maheshwari stated, “There is no such tax demand pending against me. So, there is nothing for me to comment on that.”
He further clarified, “The rest of the disclosures are made in the DRHP. There is no tax demand on me at all, from the income tax department.”
The draft red herring prospectus (DRHP) filed by Brainbees Solutions Limited includes a statement that reads, “Our Director, Supam Maheshwari, and our subsidiary, Globalbees Brands, have received a notice dated February 8, 2024, from the ROC Delhi directing Globalbees Brands to furnish certain documents.”
Additionally, the DRHP outlines ongoing litigations involving the company, noting that outstanding tax proceedings include six direct tax cases and five indirect tax cases, totaling an ascertainable amount of Rs 5.957 crore.
Marketing and Advertising Strategy
According to the DRHP, from the net proceeds of the IPO, FirstCry will allocate Rs 200 crore towards sales and marketing initiatives. FirstCry spent Rs 482.2 crore on advertising in FY24. Maheshwari explained, “We started two new businesses. We expanded into Saudi Arabia two years ago, and Globalbees is also a three-year-old business. Both of these businesses are in the digital commerce domain, so front-loading of marketing costs is inevitable. However, over time, we expect to achieve operating leverage from our marketing expenditures, similar to our performance in India.”
Maheshwari added, “While we have gained customer trust in India, it’s still early for our operations in the Middle East and the Globalbees business. But we expect to see similar success, applying the lessons we have learned in India to the UAE and KSA.”
Regarding the allocation of ad spends, Maheshwari stated, “We have a competent team that decides on digital performance marketing and brand marketing, including television. We continuously monitor performance and allocate funds accordingly.”
When asked about investing in high-ticket IPs for advertising, Maheshwari replied, “Historically, we have focused on execution. Our priority is to bring joy to young mothers and fathers. We don’t need to build awareness through major events like IPL, as our core audience, young mothers, is not typically engaged with these events. Our approach is to build trust with mothers, not make high-profile noise.”
FirstCry’s L&M Deals
FirstCry operates several home brands, including Babyhug, Pine Kids, Babyoye, and Cutewalk. Maheshwari noted, “We manage over 7,500 brands, both domestic and international, with 1.65 million SKUs. Our house brands, such as Babyhug, Cute Walk, Pine Kids, and Babyoye, serve specific age groups and categories. While we haven’t disclosed specifics in our RHP, Babyhug is currently the country’s largest multi-category brand for mothers, babies, and kids. It also holds the largest product assortment in the Asia-Pacific region, excluding China.”
Babyhug has engaged in multiple licensing and merchandising deals with Marvel and Disney. On this subject, Maheshwari commented, “Disney and Marvel have strong associations with kids and young parents, who want the best for their children. We have partnered with Disney and Marvel to cater to these audiences, providing the best products through these collaborations.”
Toys and Market Segments
Discussing toys as a category, Maheshwari said, “We cater to children from newborns to 12 years old. The toy market in India is largely unorganized, with the overall childcare market being 86% unorganized. Despite this, the toy segment is growing for us, both online and offline, driven by product innovation and partnerships with major brands like Hasbro, Lego, and Funskool.”
Maheshwari also addressed the trend toward premium products, stating, “We have observed a steady increase in our Average Order Value (AOV), growing at a CAGR of 4-4.5% over the past few years. This growth reflects both inflation and a shift towards premium products. India’s diverse market allows us to cater to different segments, offering premium options across all categories. Whether it’s through enhanced product features or exclusive collaborations, we aim to provide value at every price point.”
Expansion Plans
According to the DRHP, FirstCry plans to use the IPO proceeds for several key investments, including Rs 299.6 crore in the subsidiary Digital Age, with Rs 169 crore for new modern stores under the FirstCry and other home brands, and Rs 130.6 crore for lease payments for existing stores in India.
For international expansion, FirstCry will invest Rs 155.6 crore in the subsidiary FirstCry Trading, including Rs 72.6 crore for new stores and Rs 83 crore for warehouses in Saudi Arabia.
Additionally, Rs 169 crore will be invested in the subsidiary GlobalBees Brands for acquiring an additional stake in its step-down subsidiaries.
Maheshwari concluded, “We have ambitious expansion plans, aiming to increase our store footprint in India by 350 stores and open 12 new stores in the Middle East, specifically Saudi Arabia, over the next two to three years.”