FirstCry is one of the vertical e-commerce companies that not only survive but thrive as well. The company that attained the coveted unicorn status with a $300 million infusion from SoftBank earlier this year is one of the handful of unicorns in the consumer internet space to turn a profit. FirstCry was profitable in FY20 and now the company is using surplus funds to buyback stock from employees (ESOP).
FirstCry has passed a special resolution to buy back 13,09,860 equity shares each at a price of Rs 234.8 per share for an aggregate of Rs 30.75 crore, regulatory filings show.
As per the statutory auditor’s report in respect of the proposed buyback, the company had Rs 229.55 crore as retained earnings as on 31 March 2020. The buyback offer size is 1.3% of the fully paid-up equity share capital and free reserves as per the audited financial statements as on 31 March 2020.
Importantly, promoters and directors have not expressed their intention to participate in the buyback.
The buyback will help FirstCry improve its financial ratios like earnings per share and return on equity by reducing the equity base of the company. The company will return the surplus funds to the equity shareholders which are over and above its ordinary capital requirements, enhancing the overall return to stakeholders.
FirstCry isn’t the only one to have a proposed buyback. Companies such as Zerodha, Meesho, MFine and MyGate also bought ESOPs from employees in 2020.
Zerodha had completed its ESOP buyback worth Rs 60-65 crore in September while MFine also bought Rs 18.3 crore valued shares from employees. In August, MyGate approved to buy Rs 37.2 crore worth stocks from long term employees. MPL is also set to execute a shares buyback soon.
ESOP buybacks signal positivity as they invigorate the faith of employees in stock options.
Apart from buybacks, the rate of ESOP allotment by startups has increased multifold in the past two years. Many unicorns and growth-stage companies had allotted a significant chunk of shares to their ESOP pools. Byju’s, Paytm, Oyo, Swiggy, Zomato, Unacademy and others collectively added thousands of crore of stocks to their ESOP pool.
FirstCry was founded by Supam Maheshwari in 2012. It has raised about $425 million in total risk capital. Besides SoftBank, its previous backers include Chiratae, SAIF Partners, Adveq and Vertex Ventures. In 2016, the company acquired Mahindra’s BabyOye and also secured undisclosed funding from the Mumbai-headquartered conglomerate.
Apart from FirstCry, Byju’s and Zerodha are other profitable unicorns in the consumer internet space.