In a significant boost to India’s childcare retail sector, shares of Brainbees Solutions, the parent company of FirstCry, jumped 4% following JM Financial’s initiation of coverage with a buy rating. The development marks a crucial milestone for the company, which has established a strong presence in Tamil Nadu’s retail landscape with over 100 stores across major cities including Chennai, Coimbatore, and Madurai.
The brokerage’s bullish stance emphasizes FirstCry’s commanding position in India’s online childcare market, where it holds a 24% market share, complemented by an extensive network of 1,124 physical stores spanning 500 cities nationwide. This hybrid model has proven particularly successful in Tamil Nadu, where the company has witnessed substantial growth in both online and offline segments.
JM Financial’s comprehensive analysis highlights FirstCry’s strategic focus on developing home brands such as BabyHug, projecting a significant gross margin improvement of approximately 6.5% by FY28. This expansion strategy has found particular resonance in Tamil Nadu, where the company’s COCO (company-owned, company-operated) stores have shown strong performance metrics.
The company’s international expansion has yielded promising results, with successful operations in the UAE and Saudi Arabia. “The UAE business has already achieved profitability at the adjusted EBITDA level, and we expect the Saudi Arabian operations to follow suit within two years,” noted JM Financial’s report. This international success story serves as an inspiration for Tamil Nadu-based startups looking to expand globally.
Financial performance indicators reveal robust growth, with the company recording a 38% revenue CAGR from FY21 to FY24. The latest quarterly results ending September 2024 show significant improvement, with consolidated net losses narrowing to ₹50 crore from ₹101 crore in the previous year. JM Financial projects an impressive 20% CAGR in revenue and 51% CAGR in adjusted EBITDA from FY24 to FY29.
“FirstCry’s success in Tamil Nadu demonstrates the potential for retail innovation in Tier-2 and Tier-3 cities,” says Dr. Ramasubramanian, Head of the Tamil Nadu Retailers Association. “Their hybrid model and focus on customer experience has created a blueprint for other retailers in the region.”
The company’s expansion has significantly impacted Tamil Nadu’s startup ecosystem, creating numerous jobs and establishing new benchmarks for retail efficiency. Local entrepreneurs and retail startups are closely studying FirstCry’s successful integration of online and offline channels, particularly its use of data analytics to optimize inventory management and customer experience.
However, JM Financial’s report also identifies potential challenges, including risks of cannibalization from COCO store expansion and increased competition from platforms like Meesho. Despite these concerns, the brokerage maintains its optimistic outlook, citing the company’s proven business model and experienced founder-led management team.
For Tamil Nadu’s retail sector, FirstCry’s growth trajectory offers valuable insights into successful scaling strategies. The company’s focus on private labels and efficient supply chain management has created new opportunities for local manufacturers and suppliers, contributing to the state’s manufacturing ecosystem.
The success story of FirstCry in Tamil Nadu underscores the state’s potential as a key market for retail innovation and expansion. With its strategic focus on both online and offline channels, coupled with strong financial performance, the company continues to set new benchmarks for the retail sector in South India.
