India's sovereign wealth fund to make first digital bet with FirstCry

India’s sovereign wealth fund is planning to make its first stake in the country's booming internet economy. The National Investment and Infrastructure Fund (NIIF) have held talks to invest in SoftBank-backed vertical eCommerce player FirstCry.

If the deal goes through, it could perhaps set the stage for NIIF to invest in other tech start-ups in the country. The investment is through a secondary transaction estimated at around 150-200 million, where some early investors are selling part of their stakes in the Pune-based omnichannel retailer that focuses on baby and mother care products.

The funding is expected to take place at a valuation of a little over $2 billion, the same as in March when TPG, ChrysCapital, and Premji Invest invested around 315 million in the firm.

Sources, state, “The current discussions are for around a $150-million deal, but it could get expanded up to 200 million. This would take the total size of the ongoing round to around $450-$500 million. There could be other new investors besides NIIF, too. Those talks are underway and it could be finalized in the next four to six weeks.”

Japanese multinational company SoftBank is the single largest shareholder in FirstCry with over 40 percent stake and that will come down once the round closes formally. Conversely, it will remain its single largest shareholder.

NIIF, states, “As per NIIF policy, we do not comment on market speculation and information gathered from third-party sources. NIIF manages capital commitments of over 4.5 billion across three funds Master Fund, Fund of Funds, and Strategic Opportunities Fund. In April, it made its first investment in the Indian healthcare sector by putting around 300 million in Manipal Hospitals, one of the largest multi-specialty healthcare providers in the country. FirstCry is also looking at a potential initial public offering (IPO) in the next 12- 18 months. The company also has a logistics arm Xpresbees which was spun out in 2015. It continues to see steady demand on its platform through consumption has taken a hit due to the second Covid-19 wave. The week of Eid was very good for them (FirstCry). There is an impact of the current wave obviously, but baby care products are very essential in nature and people continue to buy them online.”

During its 300 million investments in March, investors like Elevation Capital (formerly known as SAIF Partners), Vertex Partners, and MegaDelta Capital Advisors sold their entire stakes. FirstCry, founded in September 2010, had acquired BabyOye from Mahindra Retail in an all-stock deal worth around 50 million in 2015. Its other investors include Mahindra Group, Valiant Capital, Ratan Tata, and Kris Gopalakrishnan.

FirstCry has over 300 stores across 125 cities. It has a user base of more than 4 million and offers more than 200,000 baby and children’s products from 2,000 brands. Major competitors are Hopscotch and Kids Stop Press in the online segment.