SoftBank, others may pare FirstCry stake pushing company valuation to $4 billion
Japan’s SoftBank and NewQuest Capital Partners are among existing investors seeking to sell shares of IPO-bound FirstCry in the secondary market, valuing the baby products retailer in the range of $3.5-4 billion, according to several people in the know.
Masayoshi Son-led SoftBank, which is the biggest investor in the omnichannel company with a 29% stake, wants to reduce its holding to less than 25%, another person aware of the matter said.
The discussions are happening at a time the Pune-based company is looking to pare its foreign ownership while bringing in domestic private equity funding in the runup to filing its initial public offer (IPO) papers in the next few months. FirstCry has held talks with Mumbai-based private equity firm Kedaara Capital, asking it to participate in the secondary round, multiple people said on condition of anonymity.
Sources privy to the developments said the company is “planning to file its draft red herring prospectus (DRHP) very soon”.
“This is akin to a pre-IPO deal which will set the price for the company and ideally they want to bring on board domestic funds,” one of the persons told ET. The person cited the example of Premji Invest — the family investment vehicle of Wipro NSE -1.30 % founder chairman Azim Premji — which had upped its stake during (FirstCry’s) previous secondary round when the National Investment and Infrastructure Fund’s proposed investment fell through.
FirstCry, which is a vertical ecommerce platform, is currently valued at around $2.7 billion, which was ascribed to it earlier this year when the Premji investment took place. According to a person aware of the matter, Premji Invest owns about 9-11% stake in the firm, Mahindra Retail holds 12-13% and US private equity major TPG has 5-6%.
People familiar with its IPO plan said the company is aiming to go public at a $6-7 billion valuation given that it is a rare example of a profitable ecommerce firm, having recorded net earnings in the financial year 2021.
“There are multiple sets of investors looking to participate in the pre-IPO secondary round. The company is still keen on its IPO plans and the matter will be discussed in its next board meeting,” another person privy to the discussions said.
If the company files for an IPO, it will be the first new-age tech startup to do so after logistics player Delhivery’s public float in May amid a largely skittish market.
ET had reported on May 16 that FirstCry had hit pause on its plans to file papers for the initial public offering (IPO) following the downturn in sentiments that hit the global economy.
Emailed queries sent to SoftBank and NewQuest did not elicit a response while Supam Maheshwari, CEO, FirstCry declined to comment.
SoftBank, which is saddled with $92 billion debt as of March this year and clocked $23 billion in losses for the first quarter of the current financial year, has been selling shares in its portfolio firms including Alibaba. Reuters reported that the Japanese investor is also looking to sell its shares in American online bank SoFi.
If the latest transactions get executed, this will be the third major secondary share sale at FirstCry, which was founded by Maheshwari, Amitava Saha, Prashant Jadhav and Sanket Hattimattur in 2010. The company’s parent, Brainbees Solutions, was valued at more than $2 billion prior to the secondary share sale executed earlier in April this year. Saha is the CEO of Xpressbees — the logistics firm spun out of FirstCry.
“Conversations are underway with multiple investors… If an investor has an ownership of more than 25%, the company will have to classify it as a promoter when filing for an IPO,” one of the people mentioned above said.
China’s Ant Group had divested shares in Paytm to cut its holding down to around 25% for the same reason last year. It did so through the offer-for-sale window of the much-hyped IPO.
SoftBank, others may pare FirstCry stake pushing company valuation to $4 billion. Congratulations to the entire team. I wish you great success in this endeavour.Shishir Gupta, Founder and CEO, StartupLanes
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