Brainbees Solutions Limited. – Fintoo Blog

HighlightsIssue Size –: 90,187,690 sharesIssue Open/Close – 06 Aug / 08 Aug, 2024 Price Band (Rs.)  440 – 465Issue Size (Rs.) – 41,937 mnFace Value (Rs) 2Lot Size (shares) 32Brainbees Solutions Limited (FirstCry) incorporated on 2010, is India’s largest multi-channel retailing platform for Mothers’, Babies’ and Kids’ products, in terms of GMV, for the FY24 with a growing presence in select international markets. In India, they sell products through their online platform, company-owned modern stores, franchisee-owned modern stores and general trade retail distribution.  They launched the FirstCry platform in India in 2010 with the goal to create a one-stop destination for parenting needs across commerce, content, community engagement, and education. The company seek to develop a tangible, emotional, multi-year relationship with parents, especially mothers, with who first engagement begins from their baby’s conception and can continue until their child reaches about 12 years of age.They have expanded internationally in select markets, establishing a presence in UAE and KSA in 2019 and 2022 respectively, where they aim to replicate their India playbook. Across their platform, they offer products from third-party Indian brands, global brands, and its home brand.Out of the total proceeds of Rs. 41,937 mn, Rs. 1,081 mn would go towards capex by the company for setting up new modern stores under the BabyHug brand and setting up a warehouse, in India. Rs. 931 mn would go for lease payments for their existing identified modern stores owned and operated by the company in India. Rs. 2,996 mn would go towards investment in their subsidiary, Digital Age for setting up new modern stores under the FirstCry brand and other home brands of the company; and lease payments for their existing identified modern stores owned and controlled by Digital Age, in India. Rs. 1,690 mn go for investment in their subsidiary, Globalbees brands, towards acquisition of additional stake in their step-down Subsidiaries, Rs. 2000 mn would go towards sales and marketing initiatives. Rs. 576 mn would go towards technology and data science cost including cloud and server hosting related costs. Rs. 5,830 mn would go for funding inorganic growth through acquisition and other strategic initiatives and general corporate purposes and ~Rs. 25,277 mn would go towards existing selling shareholders of the company.Key HighlightsIndia has the largest population of children globally, with approximately 306 mn children under 12 years of age as at July 1, 2023, with a birth rate of 16.4 births per 1000 people in CY22. Child care products spending per capita in India is currently nascent, at only Rs. 9,280 – 9,350 in the FY24, and is projected to grow faster than those in mature markets, at a CAGR of approximately 13 –15 pct from 2023 to 2028 (compared to 2 – 4 pct for USA and 5 – 7 pct for China).FirstyCry’s current total addressable market (TAM) is Rs. 3,865-4,000 bn in the FY24 which is estimated to grow at CAGR of 11-13 pct to approximately Rs. 6,670-7,070 bn by the FY29. FirstCry’s TAM consists of the India Childcare Products market, India Preschool Market, KSA Childcare Products Market, and UAE Childcare Products Market. Out of these, the India Childcare Products Market and the Preschool market is expected to grow at the fastest pace. FirstCry is poised to benefit from this Large TAM.They organize their business into 4 reportable segments. (i) India Multi Channel Segmet – this segment covers their online platform, modern stores as well as general trade retail distribution in India and manufacturing operations (ii) International segments – this segment covers their operations in UAE and KSA (iii) Globalbees Brands segment: this segment covers GlobalBees Brands and its subsidiaries (v) Others – This segment covers other businesses which are currently not material (for example, their education business).Their India Multi-Channel Segment represented 70.66 pct of sales, international segment represented 11.63 pct of sales, Globalbees House of Brands business represented 18.66 pct of sales in FY24.They have over 2.12 mn.sq.ft of retail space and 1,063 modern stores in 533 cities. They had the largest retail space and retail Footprint amongst Specialty Mothers, Babies, and Kids’ Retailers in India. As of FY24 they have 435 COCO stores and 628 FOFO stores.FirstCry brand affinity is demonstrated by their Annual Unique Transacting Customers’ base, which has grown to 9.11 mn for the FY24 from 6.86 mn for the FY22. Leveraging their brand strength, they have been able to and will continue to add more product and service adjacencies on platform which they expect would further increase customer base.FirstCry key strategies include (i) to grow their customer base by continuing to invest in brand, technology, products and their membership program. (ii) Grow their offline and online touchpoints to strengthen multi- channel competitive advantage. (iii) Continue to expand their portfolio of home brands (iv) Expand general trade retail distribution of their home brands. (v) Further invest in manufacturing in the baby and kids’ product categories, and supply chain capabilities (vi) Selective expand in the international markets (vii) expand and grow Globalbees House of Brands.Sales of the company has grown by ~64.29 pct CAGR during the period FY22-24 and Adjusted EBITDA grew 68.91 CAGR over same period. During FY24, company reported sales of Rs. 64,808 mn which grew by 15.06 pct YoY while adjusted EBITDA increased from Rs. 749 mn to Rs. 2,744 mn as adjusted EBITDA margin jumped sharply from1.33 pct in FY23 to 4.23 pct QoQ.  As of FY24 the company reported loss of (Rs. 3,215 mn) which was down from loss of (Rs. ~4,860 mn) pct. Key RiskThe sale of their home brand products subjects to unique risks and heightens certain other risks, such as, dependence on third-party manufacturers and suppliers for certain products and sale of home brands by unauthorized sellers.The seasonality of their business affects their quarterly results of operations and places an increased strain on its operations.They do not have full control over the quality of the products and brands sold on their multi-channel retailing platform, and may be subject to legal liabilities and reputational harm as a result of product defects, poor quality control.Financial PerformanceParticularsFY24FY23FY22Sales (in Rs. mn)648085635224012Gross Margin in (Rs mn)23176169728291Gross Margin in (%)35.76%30.12%34.53%EBITDA (in Rs. mn)704-2629-182EBITDA Margin (%)1.09%-4.67%-0.76%Adjusted EBITDA (Rs. mn)2744749961Adjusted EBITDA Margin (%)4.23%1.33%4.00%Profit/Loss (in Rs. mn)-3215-4860-786Net Working Capital Days5350102ValuationFirstCry is a leader and Pioneer of multi-channel retailing for Mothers’, Babies’ and Kids’ products in India. They have control over the manufacturing and retail distribution value chains. They have expanded internationally in select markets, establishing a presence in UAE and KSA in 2019 and 2022 respectively, where they aim to replicate their India playbook. At the upper end of the price band of Rs. 465 the issue is priced at an EV/Sales of ~3.8x which appears to be full priced. However, investors with high-risk appetite can Subscribe to this issue for longer term perspective. Also read: Why Is Financial Advisory Important?Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Adviser before making any investment using the app. Investing using the app is the sole decision of the investor and the company or any of its communications cannot be held responsible for it.