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SoftBank & Alibaba are Mulling Investment in FirstCry & Why it is such a good move

SoftBank and Alibaba are probably heading towards a very good business proposition by planning to invest $100 – 200 Mn in FirstCry, India’s largest retailer for baby products. Sources, however, claim that discussions are in a very early stage and the deal is still far from getting sealed.

There is also a huge suspense as to how much market valuation FirstCry is seeking through this fundraising. Similarly, unconfirmed news trickling from other sources claim that the Pune based retailer is also discussing with other companies, including Tencent, to raise more funds.

SoftBank & Alibaba are planning to invest $100 – 200 Mn in FirstCry

As I had mentioned above, investment in FirstCry makes for a very good investment proposition. This is solely because it is a very matured startup. Matured in a sense that it boasts a very good market traction and significant customer base. It is already the most dominant player in India’s baby and mother care sector, though most of its revenue comes from online venture and less from offline retail.

However, much of my optimism about FirstCry steams from its recent results. According to the latest regulatory filings, FirstCry’s parent company BrainBees Solutions managed to slash its loss by whopping 86% to bring it to nearly Rs 54..55 core in the current fiscal. The company’s loss was hovering around Rs 393.24 crore in the last fiscal.

I would also like to point out that the company’s success in increasing its net revenue by impressive 50% to take it to Rs 355.2 crore in the same period is equally very commendable.

While these numbers are impressive, what is also striking is that FirstCry has managed to hold its fortress despite looming competition from big boys like Flipkart and Amazon. In fact, FirstCry doesn’t have any major competitor per say. This leaves the company with a fantastic opportunity to consolidate its domination further in a market that still has a huge potential for growth.

To understand this growth potential better, we just need to look at FirstCry’s Chinese counterpart and Alibaba backed BabyTree. A small company back in 2006, but is today worth nearly $5 Bn ahead of its IPO. However, BabyTree obviously benefited from the resilient strength of the Chinese economy, which is 10 times bigger than the Indian economy and boasts a far higher per capita income.

That said, Indian economy is no small fish by any measure even though it continues to lag behind China. The economy, with all its inherent problems, is still pulling off 7%-8% growth rate to give enough scope for growth to companies like FirstCry.

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