FirstCry IPO: Planning to invest? Know key risks involved in the upcoming issue

Brainbees Solution, the parent company of the prominent online e-commerce platform FirstCry, officially filed an application for an initial public offering (IPO) with the Securities and Exchange Board of India (SEBI) on December 28.

The IPO comprises issuance of fresh equity shares worth ₹1,816 crore as well as an offer for sale by existing shareholders and promoters. Existing investors, including Mahindra & Mahindra (M&M), private equity firm TPG, NewQuest Asia, and SoftBank, are planning to collectively sell 5.44 crore shares in Brainbees through an Offer for Sale (OFS) alongside the primary issue.

According to the document, Mahindra will sell its 0.58 percent stake in the parent company; SoftBank will offload 2.03 crore shares. 

The official dates of the upcoming issue has not been announced yet, however, several media reports claim that the public issue will open in early 2024. The offer price for the issue and IPO price band have also not been announced so far.

As per the DRHP, net proceeds will be used to set up new retail stores, warehouses and international expansion.

Here are key risks involved in the upcoming public issue –

1. The historical performance is not indicative of our future growth or financial results and may not be able to sustain its historical growth rates or effectively execute its strategies, which may adversely affect business and financial results.
2. The company has incurred losses in past periods and may continue to do so in the future, which may adversely impact its business and the value of the equity shares.
3. The company fails to acquire new customers or fails to do so in a cost - effective manner, may not be able to increase its revenues or achieve profitability.
4. The company fails to engage and retain existing customers, may not be able to sustain our revenue base, which would have an adverse effect on business,  results of operations, financial condition and cash flows.
5. The sale  of our home  brand products subjects us to unique risks and heightens certain other risks, such  as,  dependence on third - party manufacturers  and  suppliers for certain products  and  raw materials,  liability  for accidents and other incidents, product liability, and sale of  home brands by unauthorized sellers.
6. The company is unable to successfully integrate the businesses, technologies, services and products that it acquire or invest in, business, results of operations, cash flows and financial condition could be adversely affected.
7. The business depends on the growth of the online commerce industry in India  and  the ability to effectively respond  to changing  customer behavior on digital  platforms. If the online commerce industry in India does not further develop and grow and if the company is not able to effectively respond to changing customer behavior, the results of operations could be adversely affected.
8. Delays or defaults by the brand relationships, vendors or manufacturers could affect its cash flows and may adversely affect the business and results of operations.
9. The company is exposed  to  the  risks  associated with reliance upon the  services of  third - party data center hosting facilities and other third-party providers for its business and operations.
10. The company’s inability to effectively manage or expand its retail network may have an adverse effect on its business, results of operations and financial condition.