The founder and managing director of FirstCry, Supam Maheshwari, divested 6.2 million shares in the company within ten days before the presentation of the initial public offering, as outlined in the draft prospectus of the company (DRHP).
At a significant price of ₹487.44 per share, marking the highest rate for a secondary share sale in December, Maheshwari’s divested shares would amount to a valuation exceeding ₹300 crores. Notably, the CEO of FirstCry included himself as a selling shareholder in the upcoming public issue.
Also Read: Firstcry IPO: Issue details, targets and more – 10 key things to know from DRHP
While Maheshwari originally owned 35,097,831 shares, equivalent to a 7.46 percent stake in the company, until the draft articles were filed, his ownership decreased to 28,893,347 shares, representing a 5.95 percent stake on the filing date.
Some media reports indicate that in a recent stock sale round, the founders of FirstCry, in addition to SoftBank, divested their shares at a valuation exceeding ₹23,000 crores. According to the information outlined in the DRHP, secondary sales in December took place at an approximate valuation of ₹23,700 crore or ₹487.44 per share.
FirstCry is expected to price its initial public offering (IPO) with a valuation ranging between $3.5 billion to $3.75 billion. At the higher end of this spectrum, it would represent a 31 percent premium for investors who acquired the shares at ₹487.44 each back in December.
Also Read: Ratan Tata offload all 77,900 shares in FirstCry IPO
The DRHP indicates that Maheshwari divested 9.34 million shares in the six months prior to the DRHP filing date. At a price of ₹487.44 per share, this transaction would amount to a value exceeding ₹455 crores.
In addition, the IPO filing disclosed that a board resolution on December 27, coinciding with FirstCry’s application for a public listing, resulted in the transfer of 14.9 million shares to the company’s Employee Stock Ownership Plan (ESOP) trust. with a speed of ₹243 per share.
According to an undisclosed Chief Financial Officer of a unicorn, the transfer of shares to an Employee Stock Ownership Plan (ESOP) trust can be strategically implemented. This strategic move could involve reducing the promoter’s shareholding before an Initial Public Offering (IPO) or diluting the stake held by a foreign investor to comply with foreign direct investment regulations.
Also Read: FirstCry IPO: Are you planning to invest? Know key risks involved in the upcoming issue
According to the DRHP, the founder of FirstCry received remuneration from ₹200 crores in the fiscal year 2023, ₹29 crore in FY22, and ₹14 crore in FY21. This includes short-term employee benefits and stock payment accruals. As of the first quarter of FY24, Maheshwari’s remuneration amounted to ₹26 crores.
FirstCry witnessed a doubling of ESOP costs or stock payment expenses of ₹46 crore in FY21 to ₹92 crore in FY22. This figure then arose almost four times of ₹92 crore in FY22 to ₹361 crore in FY23. The cost of ESOP for the initial quarter of FY24 stood ₹45 crores.
Also Read: FirstCry IPO: Sachin Tendulkar, Infosy founder and others likely to buy shares of e-commerce company ahead of release
Despite being backed by SoftBank, the company experienced a widening loss, increasing from ₹79 crore in FY22 to ₹486 crore in FY23.
In its upcoming IPO, FirstCry aims to raise ₹1,816 crore through primary issue of equity shares. Existing investors such as Mahindra and Mahindra (M&M), SoftBank, Premji Invest, TPG, NewQuest, and others will collectively sell Rs 5.4 crore in the offer for sale (OFS).
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Published: 08 Jan 2024, 19:03 IST