Brainbees Solutions (Firstcry.com): 1 yr since listing, does it make any sense to invest?

Brainbees Solutions came out with an IPO in 1st week of August'24, to raise ~ ₹4200 crs @ a price of ₹465 per share. About 40% of the issue was Fresh Fund Raise & remaining was an Offer For Sale. The stock listed @ ₹650+ & closed Day-1 @ ₹679, i.e. ~ 46% higher than Issue price. This super-listing was widely anticipated as the IPO was over-subscribed by over 12-times. The stock went on to hit a high of over ₹730 in October'24.

It has been a completely different story since then. Today the stock trades at ₹365, i.e. 50% down from it's All-Time-High and even 22% lower than it's IPO Issue price. This move over the last 1 year clearly shows how some IPOs are hyped so much that most people who get in are there only to make quick gains. The real Investors will get in only when they see good Value in the business.

What is Firstcry's business?: The brand name clearly suggests it is something to do with Babies. Firstcry is certainly into sale of goods for children, right from new-born babies going upto maybe teenage kids, and their mothers. They have their own e-commerce platform, i.e. a full-fledged website & also a proper mobile app. Firstcry also has their Branded Stores across several cities in India & even has a few stores in UAE. While the e-commerce platform has to compete with the likes of Amazon & Flipkart, the Offline Stores of Firstcry do not have much Branded competition, but there is ample competition from fragmented players. Firstcry has developed certain in-house brands to cater to certain product segments, which are getting quite popular. Babyhug is one such Brand.

How is Firstcry's business doing recently?: In FY25, Firstcry reported a growth of 18% in it's Total Income to just over ₹7700 crs. It is quite possible that this modest growth figure is what might have disappointed many market participants, especially when some other new-age businesses from e-commerce & quick-commerce space were reporting much higher growth rates. As for me, I am happy with a modest sustainable growth figure of between 15 to 20% Y-o-Y, with good focus on profitability as they scale up.

Firstcry's business has now reached a scale where it has started generating a decent Cash Profit, especially from it's India operations. And the long-term growth potential of this business model is very sustainable, not just in India but across the world. Hence I do see Firstcry continuing to expand it's operations, both in India & abroad, though in a measured manner so as not to stretch themselves too much on the Resouce front & compromise heavily on Profitability. This measured expansion will help them improve their Profitability in the coming few years, with better economies of scale.

How is Firstcry's Valuation currently?: At the existing share price of ₹365, Firstcry's Market Cap stands at about ₹19,000 crores. Firstcry generated a Cash Profit of just over ₹200 crores in FY25 on a Revenue of about ₹7700 crores. I am expecting it to double it's Revenues to over ₹15,000 crores in the next 4 years. And by then the Annual Cash Profit generation could be over ₹1500 crores, making the current Valuation quite attractive from long-term Investment perspective. If Firstcry manages to grow at anything significantly faster than 15% Y-o-Y, will be considered a Bonus on my primary expectations.