In its latest research dated May 27, 2025, Kotak Institutional Equities reaffirmed a BUY rating on BrainBees Solutions (FirstCry), pegging a revised fair value of Rs 530 per share, down marginally from Rs 540 earlier. Despite a softer-than-expected performance in some verticals for Q4FY25, Kotak remains optimistic on the company’s structural growth prospects—especially in India’s multichannel retail segment and the emerging GlobalBees platform. Slowing international momentum and rising operational costs temper the near-term outlook, but FirstCry's homegrown brand strength and omnichannel expansion provide long-term tailwinds.

Revenue Growth Driven by India Multichannel and GlobalBees

FirstCry reported a consolidated revenue growth of 15.8% year-over-year (YoY) for Q4FY25, reaching Rs 19,303 million. However, sequentially, revenue declined 11.1%, primarily due to weaker-than-expected winterwear demand and moderation in offline retail.

India Multichannel Revenue: Rs 13,373 million (up 11.5% YoY)

International Revenue: Rs 2,054 million (up 11.2% YoY)

GlobalBees Revenue: Rs 3,984 million (up 33.4% YoY)

EBITDA Margins Reflect Operational Improvements

While FirstCry’s overall adjusted EBITDA margin stood at 5.2%, down from 6.4% in Q3FY25, the India multichannel business delivered a notable EBITDA margin of 9.3%, an expansion of 47 basis points YoY. This improvement is attributed to higher gross margins and a greater proportion of private label products.

GlobalBees, still in its early growth phase, reported a modest 0.7% EBITDA margin, improving from a negative margin last year.

Homegrown Brands Strengthen Customer Retention and Margins

The share of homegrown brands in India’s GMV rose from 37% in FY2020 to 55% in FY2025. Management cited Babyhug as Asia-Pacific’s largest brand for mothers, babies, and kids by product assortment (excluding China). These brands support higher margins and enhance customer stickiness.

Annual Transacting Users and Retail Expansion

India ATU (Annual Transacting Users): 10.1 million (up 16.1% YoY)

International ATU: 0.5 million (up 25% YoY)

Retail Stores in India: 1,156 as of Q4FY25, with 45% being COCO (company-owned, company-operated) stores

Offline channels accounted for 22% of India GMV, while online contributed the remaining 78%. Notably, 38% of GMV from top-20 cities came from cross-channel customers, affirming FirstCry’s strength in omnichannel execution.

International Business Faces Competitive Pressure

While the international segment grew revenues by 11.2% YoY, adjusted EBITDA margins contracted due to intensified competition from horizontal e-commerce players. The company operates solely through online channels in the UAE and targets markets with higher per-child spending and birth rates. Kotak now values the international business at zero, citing slower-than-expected growth and margin pressures.

GlobalBees: Early-Stage, Category-Focused Growth Engine

The GlobalBees segment, which focuses on home improvement, appliances, and personal care, saw a 33% YoY increase in revenue. EBITDA margins improved by 105 bps YoY to 0.7%. The company aims to make GlobalBees EBITDA-neutral over time by reducing lower-margin categories and leveraging scale efficiencies.

Franchisee Preschool Business Sees Momentum

Total Franchisee Schools: 363

FY2025 Revenue: Rs 425 million (vs. Rs 334 million in FY2024)

Adjusted EBITDA Margin: 24% in FY2025, up from 18% YoY

Financial Snapshot and Key Metrics

Kotak has adjusted revenue and EBITDA estimates for FY2026-28 based on modest earnings revisions:

Valuation: SoTP-Based Fair Value at Rs 530

Kotak’s revised sum-of-the-parts (SoTP) valuation for FirstCry is broken down as follows:

India business (DCF): Rs 218 bn

GlobalBees (2x FY27 EV/Sales): Rs 50 bn

Other businesses: Rs 7 bn

Net cash: Rs 7 bn

Total equity value is Rs 282 bn, which translates to a fair value of Rs 530/share, based on a diluted share count of 533 million.

Investment Outlook and Risk Factors

FirstCry's strengths lie in its dominant India multichannel operations, brand equity in baby/kids’ fashion, and growing share of high-margin home brands. Despite slowing growth in international markets, management remains focused on profitability and cash-flow discipline.

Key risks include:

Macroeconomic softness impacting discretionary spending

Rising competition from generalist e-commerce players

Execution delays in expanding GlobalBees profitability

Investor Takeaway

Kotak Institutional Equities remains confident in FirstCry’s long-term strategic narrative, anchored on strong domestic operations, efficient omnichannel distribution, and scale-driven cost benefits. While international exposure is currently non-accretive, India’s margin expansion and retail footprint position the company well for future rerating. Investors may consider accumulating the stock at current levels, with target potential of Rs 530 over a 12-month horizon.

Recommendation: BUY
Target: Rs 530
CMP (as of May 26, 2025): Rs 375
Upside Potential: ~41%