Brainbees Solutions, the parent company of kids-focused omnichannel retailer FirstCry, is reportedly going to withdraw its $500 million IPO within four months of filing a draft red herring prospectus with the regulator: Security Exchange Board of India (SEBI).
According to a Reuters report, the firm has planned to pull back IPO papers as SEBI raised questions over key metrics it disclosed to investors.
As per SEBI’s new rule introduced in 2022, an IPO-bound company must share all key business metrics that it has shared with prospective investors in the last three years.
The report further said that FirstCry may refile IPO papers soon with the latest financials (three quarters of FY24: March 2023 to December 2023).
Entrackr has reached out to FirstCry for comment.
In its DRHP, SoftBank-backed FirstCry had proposed to raise funds through a fresh issue of equity shares aggregating up to Rs 1,816 crore and an offer for sale (OFS) of up to 54,391,592 equity shares.
Along with SoftBank, Mahindra & Mahindra, Premji Invest, New Quest Asia, Apricot Investments, Valiant Partners, TIMF Holdings, Think India Opportunities, and Schroders Capital were set to divest their shares in the OFS.
For the fiscal year ending March 2023 (FY23), FirstCry’s revenue from operations spiked more than two-fold to Rs 5,632 crore from Rs 2,401 crore in FY22. Significantly, the Pune-based firm also reported a six-fold jump in its losses to Rs 486 crore in FY23. During Q1 FY24, it reported Rs 1,407 crore revenue and Rs 110 crore loss.
The withdrawal of FirstCry from IPO after SEBI concern is likely to set a precedent for other late-stage startups which are yet to file initial papers. The regulators in India such as SEBI and RBI have become ruthless when it comes to disclosures and compliances. Last year, insurance company Go Digit faced a similar situation when SEBI returned its prospectus over employee stock plans. The stringent actions by RBI across peer to peer lending, short term loan and gaming segments outline that circumvention of policies could be fatal.
In the past, Oyo, Mobikwik, boAt, PharmEasy, and others also withdrew their IPO plans. MobiKwik, however, refiled its DRHP in January this year after turning profitable.
