• Firstcry IPO has hit a roadblock with SEBI’s demand of disclosure of important business details.

  • SEBI has tigthened its regulations following criticism for overseeing listing of recent IPOs done by loss making companies.

  • Firstcry’s losses increased six found for the fiscal year ending March 2023.

FirstCry, a well-known retailer specializing in baby products, is poised to withdraw its application for a $500 million Initial Public Offering (IPO) in the upcoming week. Sources familiar with the situation have disclosed that this decision follows heightened scrutiny from the Securities and Exchange Board of India (SEBI) regarding the disclosure of vital business metrics.

 

Backed by prominent investors like SoftBank, TPG, and Mahindra, FirstCry, operating under its parent company BrainBees, filed for an IPO last December. The plan was to raise about $215 million through new shares and an additional $300 million by selling existing shares, making it one of India’s largest IPOs this year.

 

However, regulatory hurdles emerged when SEBI flagged non-compliance with its 2022 directive. The mandate requires companies seeking IPOs to divulge all essential business metrics to potential investors, as they have done over the past three years. Sources revealed, “SEBI informed the company about its failure to adhere to Indian regulations mandating the disclosure of all key business metrics shared with prospective investors over the past three years.”

 

SEBI’s emphasis on comprehensive disclosure underscores its intensified scrutiny of firms aiming for IPOs, especially following criticisms of its oversight of loss-making companies with lofty valuations in the past.

 

While FirstCry’s draft papers provided detailed metrics such as average order value, annual transacting customers, and order volume, the compliance issue has prompted a reassessment of its IPO plans.

 

“One source disclosed that FirstCry intends to retract its IPO papers, make necessary adjustments, and resubmit them as early as next week,” indicating a prompt response to regulatory feedback.

 

Financial data from the company’s draft papers highlights a sixfold loss increase to $57.6 million for the fiscal year ending March 31, 2023. However, total income more than doubled to $684 million during the same period, showcasing significant growth alongside mounting losses.