IPO bound Firstcry to expand operations in Saudi; allocate Rs 155 crore

Brainbees Solutions, the parent company of the childcare products brand Firstcry, is planning to expand its operations in Saudi Arabia. This move comes in light of the higher average expenditure on childcare products in the Kingdom, which is nearly eight times that of India. The Softbank backed company, which submitted its draft red herring prospectus (DRHP) in December, intends to allocate Rs 155 crore from its initial public offering (IPO) proceeds to enhance its presence in the Gulf country.

Already a prominent player in the Saudi market, this investment will further strengthen its position. According to the DRHP, Firstcry aims to invest Rs 73 crore in opening 12 new outlets across Saudi Arabia. Additionally, the company is looking to invest Rs 83 crore to establish a warehouse facility spanning 250,000 square feet.

This facility is expected to boost both distribution capabilities and offline presence within the Kingdom. In India, Firstcry operates 936 retail stores, supported by a network of 80 warehouses and stockists. It is recognised as the largest multi channel retail platform for children's products.

The expenditure on childcare products per child in Saudi Arabia stands at approximately Rs 60,000, in stark contrast to about Rs 8,000 in India. The Kingdom also has a relatively high birth rate of 17.5 per thousand in 2021, surpassing India's 16.4 and significantly higher than China's 7.5.

Saudi Arabia is the largest market for childcare products within the Gulf Cooperation Council (GCC) region, with an estimated value of Rs 49,400 crore ($6.2 billion) in 2022. This market is expected to grow at an annual rate of 4 per cent until 2027, potentially reaching between Rs 59,000 crore and Rs 63,000 crore ($7.4 billion to $7.9 billion).

Factors driving this growth include the increasing penetration of e commerce, higher employment rates, growing parental concern for children’s health and safety, and a wider range of convenient shopping options on online platforms. In Saudi Arabia, FirstCry faces competition from organised online retailers such as Amazon and Noon, as well as from niche market players like Mamas and Papas, and the Landmark Group's Babyshop.

FirstCry, in its DRHP, notes the significant potential for childcare focused e commerce companies in the coming years, citing the current lack of specialty brands and growing demand for childcare products in the country. The company commenced its Saudi Arabian operations in August 2022, aiming to replicate its successful business model from India.

Within just 18 months, FirstCry Arabia has made considerable progress. The platform offers over 167,500 stock keeping units (SKUs) from more than 3,100 brands across various categories, including apparel, footwear, baby gear, nursery items, diapers, toys, and personal care products. As of June 2023, the FirstCry Arabia mobile app, covering the United Arab Emirates and Saudi Arabia, had been downloaded 2.7 million times.

Firstcry’s international gross merchandise value (GMV) has seen a 2.3 fold increase, from Rs 377 crore in the financial year 2021 to Rs 875 crore in FY23. The average order value has also risen, from Rs 5,311 in FY21 to Rs 7,644 in the first quarter of FY24. This growth, partly attributed to a low base effect, sets a promising stage for the company's future expansion..