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Online baby products seller FirstCry is acquiring\noffline retailer Mahindra BabyOye for Rs 362.1 crore in a primarily\nstock deal, a development that signals how building an offline presence\nis becoming important for vertical etailers. \n
\nFounded by serial entrepreneur Supam Maheshwari, First-Cry will acquire\nthe unit of $18 billion software-to-automobiles congolmerate Mahindra\n& Mahindra, which in turn will invest in the Pune-based\nstartup.
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\nFirstCry has now been valued at $300-350 million (Rs 2,000-2,330\ncrore), according to two sources familiar with the matter. The deal\nwill nearly double its valuation from about $155-160 million last year.\n
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\nMahindra’s will get a minority stake in FirstCry as part of the\ntransaction. FirstCry owner Brainbees Solutions will issue shares worth\nRs 354.6 crore to Mahindra Group and pay Rs 7.5 crore in cash,\naccording to filings made with stock exchanges.
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\nAs a part of the transaction, First-Cry has also raised Rs 226 crore\n($34 million) in fresh funding from Mahindra, Switzerland’s asset\nmanagement company Adveq and Infosys cofounder Kris Gopalakrishnan,\nbesides existing backers like SAIF Partners, IDG Ventures India, NEA,\nValiant Capital and Vertex.
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\nThe deal will help FirstCry create one of the largest omnichannel\ndistribution plays in India with nearly 300 stores across 125 cities in\nthe country. The company had earlier said that it planned to open 700\nfranchisee stores in the next 3-4 years and the Mahindra brand will\nhelp it build more trust in the market.
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\n“With this transaction, our true omni-channel potential will evolve as\nwe will have a significant network to take the orders online and get\nthem delivered or picked up from stores,” CEO Supam Maheshwari said,\nadding that customers order 11 times a year from FirstCry. He declined\nto comment on the valuation. The deal will help First-Cry move faster\ntowards its goal of profitability, as it leverages scale to drive cost\nefficiencies, rope in more brands and even expand to international\nmarkets.
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\nFirstCry will also look at more acquisitions, especially in segments\nlike kidswear brands and digital media startups targeting parents,\naccording to Maheshwari.
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\nFirstCry’s acquisition of Mahindra BabyOye reverses the trend of\njustoffline players such as Future Retail acquiring Fabfurnish at a\ndistress price of less than Rs 10 crore and Titan Company buying 62% in\nonline jewellery retailer CaratLane for Rs 357 crore.
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\nAll vertical etailers, from eyewear player Lenskart, furniture seller\nPepperfry and lingerie player Zivame, have built or are building a\nlarge offline presence. Even fashion portal Myntra, part of Flipkart,\nplans to sell its private labels through offline retail.
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\nThe move also comes at a time when the world’s largest retailers are\nlooking to build omnichannel players. US brick and mortar retail giant\nWalmart has made building an online presence a priority, also acquiring\netailer Jet for $3.3 billion.
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\nOn the other hand, online retail giant Amazon reportedly plans to open\nretail outlets in the US. The baby and mother-care segment presents a\n$12-billion market, but it also presents its own challenges given the\ncomplexity of products. <\/p>\n