
Deal focus: Family offices flock to FirstCry

FirstCry’s USD 52m funding round underscores the willingness of certain Indian family offices to lead sizeable technology deals and the importance attached by companies to investor base diversification
How many Indian family offices could feasibly lead a growth-stage round for a local start-up? Had he been asked that question five years ago, said Karan Sharma, the answer would have been one: PremjiInvest, the brainchild of Azim Premji, whose family founded Wipro. Now, it’s between five and 10.
"It has been a function of how their own liquidity has evolved and their comfort with tech business models. They are always learning and they have understood how to underwrite the risk-reward," said Sharma, who co-heads the digital and technology investment banking practice at Avendus Capital.
"Finally, there is a realisation that if you want to participate in India’s growth journey, you need to diversify into the new economy.”
The point about liquidity is ably demonstrated by Ranjan Pai, CEO of Manipal Education & Medical Group, who sold a stake in the company's healthcare entity earlier this year for USD 2bn. His MEMG Family Office is one of three participants in a INR 4.35bn (USD 52.7m) round for Indian mother-and-baby retailer FirstCry.
The other two are Sharrp Ventures, which represents the Harsh Mariwala family, owner of consumer goods giant Marico, and the family office of Hemendra Kothari, chairman of DSP Investment Managers. Avendus advised on the deal.
The transaction comprised entirely secondary shares, with the incoming investors taking out part of a position held by SoftBank Vision Fund I. AVCJ Research’s records show that SoftBank committed approximately USD 300m to the company across two tranches in 2019 and 2020. Its FirstCry stake is said to have been nearly 40% at one point, but this has been pared back gradually and is now below 30%.
The introduction of more family offices to the cap table represents a concerted effort by FirstCry to achieve better foreign-domestic balance in its shareholder base. Notably, when the company raised USD 315m in 2021 – selling a combination of primary and secondary shares – PremjiInvest participated alongside the likes of TPG Growth and ChrysCapital Partners.
There is a regulatory factor – retail and e-commerce companies looking to go public on India’s exchanges must be majority-owned by domestic investors – but FirstCry is not in danger of failing to meet this requirement, Sharma said. He sees the fundraise as more of an exercise in diversification, comparing it to similar moves by other companies, including Lenskart.
FirstCry hasn’t raised any new primary capital for several years, partly because it has been profitable for the past three years. This was a key consideration for the family offices, which would have been competing for allocations with the growing number of pre-IPO funds raised by Indian wealth managers.
“These families have always been keen to do more tech, but they normally focus on early-stage companies. They see few late-stage opportunities involving profitable companies, but when these deals come up, they are comfortable writing larger cheques," said Sharma.
FirstCry is no longer an ingenue in Indian e-commerce, having been established 13 years ago and emerged as the dominant player in its category. The company, which claims 7.5m registered users, has evolved from an online platform into an omnichannel player with more than 900 stores across 350 cities. It has also built India’s largest online community for parents, boasting 13m unique monthly users.
The company could be seen as representative of a new phase for technology start-ups. Market leaders have gradually abandoned aggressive growth strategies that involved the pursuit of market share at almost any cost. Competition has eased in recent years, with some rivals falling back, and this has encouraged a paring of experimental costs and an emphasis on operational improvement.
India’s public markets attributing disproportionately high value to profitable companies is also a consideration. One outstanding question is whether the sharp post-listing price drops that troubled the first wave of Indian internet IPOs can be abated. Sharma is confident on this front.
“Prior to going public, some tech companies raised capital at rich valuations when markets were at their peak. When the time came to list, they were doing it at valuations that had further expanded in a very short period from the most recent private round, due to tailwinds in the public markets," he said.
"Today, people want to be rational regarding valuations at which they go public, and this means the last few private rounds are rationalised as well. This is a factor of market dynamics.”
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.